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The spillover effects of target interest rate news from the U.S. Fed and the European Central Bank on the Asia-Pacific stock markets

Suk-Joong Kim () and Tho Nguyen ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper provides comprehensive evidence on the spillover effects of the U.S. Fed’s and the European Central Bank (ECB)’s target interest rate news on the market returns and return volatilities of 12 stock markets in the Asia-Pacific over the period 1999–2006. The news spillover effects on the returns are generally consistent with the literature where amajority of stock markets shows significant negative returns in response to unexpected rate rises. While the results of the speed of adjustment for the Fed’s news are mixed across the markets, the ECB news was absorbed slowly, in general. The return volatilities were higher in response to the interest rate news from both sources. In addition, both the Fed and the ECB news elicited tardy or persisting volatility responses. These findings have important implications for all levels of market participants in the Asia-Pacific stock markets.

Keywords: Target interest rate news; Spillover effects; U.S. Fed; ECB (search for similar items in EconPapers)
JEL-codes: G14 G15 E44 (search for similar items in EconPapers)
Date: 2008-12-08
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Published in Journal of International Financial Markets, Institutions and Money 3.9(2008): pp. 415-431

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Journal Article: The spillover effects of target interest rate news from the U.S. Fed and the European Central Bank on the Asia-Pacific stock markets (2009) Downloads
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