U.S. Monetary Shocks and Global Stock Prices
December 1, 2010
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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.
Subject: Asset prices, Central bank policy rate, Financial sector development, Stock markets, Stocks
Keywords: beta coefficient, firm size, futures contract, monetary policy shock, stock price, stock return, WP
Pages:
28
Volume:
2010
DOI:
Issue:
278
Series:
Working Paper No. 2010/278
Stock No:
WPIEA2010278
ISBN:
9781455210855
ISSN:
1018-5941
