U.S. Monetary Shocks and Global Stock Prices

Author/Editor:

Hui Tong ; Luc Laeven

Publication Date:

December 1, 2010

Electronic Access:

Free Full text (PDF file size is 976 KB).Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper studies how U.S. monetary policy affects global stock prices. We find that global stock prices respond strongly to changes in U.S. interest rate policy, with stock prices increasing (decreasing) following unexpected monetary loosening (tightening). This impact is more pronounced for sectors that depend on external financing, and for countries that are more integrated with the global financial market. These findings suggest that financial frictions play an important role in the transmission of monetary policy, and that U.S. monetary policy influences global capital allocation.

Series:

Working Paper No. 10/278

Subject:

Frequency:

Monthly

English

Publication Date:

December 1, 2010

ISBN/ISSN:

9781455210855/1018-5941

Stock No:

WPIEA2010278

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

28

Please address any questions about this title to publications@imf.org