Global Bonding: Do U.S. Bond and Equity Spillovers Dominate Global Financial Markets?

December 20, 2012

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Tamim Bayoumi, and Trung T Bui. Global Bonding: Do U.S. Bond and Equity Spillovers Dominate Global Financial Markets?, (USA: International Monetary Fund, 2012) accessed December 21, 2024

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 uses a novel variant of identification through hetroscedacity to estimate spillovers across U.S., Euro area, Japanese, and UK government bond and equity markets in a vector autoregression. The results suggest that U.S. financial shocks reverberate around the world much more strongly than shocks from other regions, including the Euro area, while inward spillovers to the U.S. from elsewhere are minimal. There is also evidence of two-way spillovers between the UK and Euro area financial markets and spillovers from Europe to Japan. The results also suggest that the uncertainty about the direction of causality of contemporaneous correlations—an issue that other techniques cannot tackle—is the dominant source of uncertainty in the estimated impulse response functions.

Subject: Bond yields, Financial institutions, Financial markets, Financial sector policy and analysis, Securities markets, Spillovers, Stock markets, Stocks

Keywords: Bond market, Bond yield, Bond yields, Coefficient, Equity price, Global, Government bond market, Identification, Impulse response function, International financial linkages, Market, Market closing, Securities markets, Spillover coefficient, Spillovers, Stock markets, Stocks, UK bond yield shock, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/298
Stock No:

WPIEA2012298
ISBN:

9781475586633
ISSN:

1018-5941

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