U.S. Monetary Shocks and Global Stock Prices

December 1, 2010

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Format: Chicago

Luc Laeven, and Hui Tong. U.S. Monetary Shocks and Global Stock Prices, (USA: International Monetary Fund, 2010) accessed November 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 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

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/278
Stock No:

WPIEA2010278
ISBN:

9781455210855
ISSN:

1018-5941

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