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Investment funds, monetary policy, and the global financial cycle

Christoph Kaufmann

VfS Annual Conference 2020 (Virtual Conference): Gender Economics from Verein für Socialpolitik / German Economic Association

Abstract: This paper studies the role of international investment funds in the transmission of global financial conditions to the euro area using structural Bayesian vector auto regressions. While cross-border banking sector capital ows receded significantly in the aftermath of the global financial crisis, portfolio ows of investors actively searching for yield on financial markets world-wide gained importance during the post-crisis "second phase of global liquidity" (Shin, 2013). The analysis presented in this paper shows that a loosening of US monetary policy leads to higher global investment fund in ows to euro area equities and debt. These in ows do not only imply elevated asset prices, but also coincide with increased debt and equity issuance in the euro area. The findings demonstrate the growing importance of non-bank financial intermediation over the last decade and have important policy implications for monetary and financial stability.

Keywords: Monetary policy; international spillovers; capital ows; investment funds (search for similar items in EconPapers)
JEL-codes: F32 F42 G11 G15 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fdg, nep-ifn, nep-mon and nep-opm
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https://www.econstor.eu/bitstream/10419/224573/1/vfs-2020-pid-39682.pdf (application/pdf)

Related works:
Working Paper: Investment funds, monetary policy, and the global financial cycle (2021) Downloads
Working Paper: Investment funds, monetary policy, and the global financial cycle (2020) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc20:224573

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