Risk, monetary policy and asset prices in a global world

Geert Bekaert, Marie Hoerova and Nancy R. Xu

No 2879, Working Paper Series from European Central Bank

Abstract: We study how monetary policy and risk shocks affect asset prices in the US, the euro area, and Japan, differentiating between “traditional” monetary policy and communication events, each decomposed into “pure” and information shocks. Communication shocks from the US spill over to risk in the euro area and vice versa, but traditional US shocks show no spillover effects to risk. Both monetary policy and communication shocks spill over to stocks, with euro area information spillovers being particularly strong. US spillovers are consistent with global CAPM intuition whereas euro area spillovers are larger. Importantly, we document a strong global component of risk shocks which is not driven by monetary policy. JEL Classification: E44, E52, G12, G20, E32

Keywords: central bank communications; global financial cycle; interest rate; international spillovers; monetary policy; risk; stock returns; trilemma (search for similar items in EconPapers)
Date: 2023-11
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-fdg, nep-ifn and nep-mon
Note: 919428
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Related works:
Working Paper: Risk, Monetary Policy and Asset Prices in a Global World (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20232879

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