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U.S. Monetary Shocks and Global Stock Prices
Author:
Mr. Luc Laeven
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and
Mr. Hui Tong
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Series:
IMF Working Papers
Volume/Issue:
Volume 2010: Issue 278
Language:
English
Publication Date:
01 Dec 2010
DOI:
https://doi.org/10.5089/9781455210855.001
ISBN:
9781455210855
ISSN:
1018-5941
Pages:
28
Keywords:
WP; stock price; stock return; monetary policy shock; firm size; beta coefficient; futures contract
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund