Global financial transmission of monetary policy shocks

Michael Ehrmann and Marcel Fratzscher

No 616, Working Paper Series from European Central Bank

Abstract: The paper shows that US monetary policy has been an important determinant of global equity markets. Analysing 50 equity markets worldwide, we find that returns fall on average around 3.8% in response to a 100 basis point tightening of US monetary policy, ranging from a zero response in some to a reaction of 10% or more in other countries, as well as significant cross-sector heterogeneity. Distinguishing different transmission channels, we find that in particular the transmission via US and foreign short-term interest rates and the exchange rate play an important role. As to the determinants of the strength of transmission to individual countries, we test the relevance of their macroeconomic policies and the degree of real and financial integration, thus linking the strength of asset price transmission to underlying trade and asset holdings, and find that in particular the degree of global integration of countries JEL Classification: F36, F30, G15

Keywords: advanced economies; emerging market economies.; financial integration; global financial markets; monetary policy; transmission; United States (search for similar items in EconPapers)
Date: 2006-04
Note: 203739
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

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Related works:
Journal Article: Global Financial Transmission of Monetary Policy Shocks* (2009)
Working Paper: Global Financial Transmission of Monetary Policy Shocks (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2006616

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