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The impact of unconventional monetary policy on the tail risks of stock markets between U.S. and Japan

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  • Wang, Yi-Chen
  • Wang, Ching-Wen
  • Huang, Chia-Hsing

Abstract

Facing the economic downturn, the central bank of U.S. and Japan adopts the unconventional monetary policy to stimulate their economy. This paper studies the quantitative easing policy effectiveness via the tail risks of stock markets in the U.S., Japan and the other 74 countries. Although the stock markets of U.S. and Japan reveals the announcement-day effects of the QE policy, this study finds an asymmetric tail risk of return distribution on the QE policy effect. The post-period right-tail and left-tail risks of the stock markets are significantly smaller and larger than that of the pre-period of the QE programs, respectively. This implies that the tail risks of stock returns have dissimilar interdependence with the QE programs. Furthermore, the geographical dependence is the major factor that determines the contagion of stock market, and the fragility of foreign stock market caused by the US QE policy is larger than that of the Japan.

Suggested Citation

  • Wang, Yi-Chen & Wang, Ching-Wen & Huang, Chia-Hsing, 2015. "The impact of unconventional monetary policy on the tail risks of stock markets between U.S. and Japan," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 41-51.
    • Handle: RePEc:eee:finana:v:41:y:2015:i:c:p:41-51
    DOI: 10.1016/j.irfa.2015.05.020
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    Cited by:

    1. Kiendrebeogo, Youssouf, 2016. "Unconventional monetary policy and capital flows," Economic Modelling, Elsevier, vol. 54(C), pages 412-424.
    2. Inoue, Tomoo & Okimoto, Tatsuyoshi, 2022. "International spillover effects of unconventional monetary policies of major central banks," International Review of Financial Analysis, Elsevier, vol. 79(C).
    3. Kuan-Chieh Chen, 2022. "The Spillover Effects of US Unconventional Monetary Policy on the Taiwanese Economy," International Journal of Economics and Financial Issues, Econjournals, vol. 12(2), pages 104-109, March.
    4. Zhang, Yi & Zhou, Long & Wu, Baoxiu & Liu, Fang, 2024. "Tail risk transmission from the United States to emerging stock Markets: Empirical evidence from multivariate quantile analysis," The North American Journal of Economics and Finance, Elsevier, vol. 73(C).
    5. Wang, Ling, 2023. "Central bank asset purchases, banks’ risky security holdings and profitability: Macro and micro evidence from Japan and the U.S," International Review of Economics & Finance, Elsevier, vol. 87(C), pages 347-364.
    6. Stephanos Papadamou & Νikolaos A. Kyriazis & Panayiotis G. Tzeremes, 2020. "US non-linear causal effects on global equity indices in Normal times versus unconventional eras," International Economics and Economic Policy, Springer, vol. 17(2), pages 381-407, May.
    7. Stephanos Papadamou & Nikolaos A. Kyriazis & Lydia Mermigka, 2017. "Japanese Mutual Funds before and after the Crisis Outburst: A Style- and Performance-Analysis," IJFS, MDPI, vol. 5(1), pages 1-20, March.
    8. Shogbuyi, Abiodun & Steeley, James M., 2017. "The effect of quantitative easing on the variance and covariance of the UK and US equity markets," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 281-291.
    9. Mészáros Mercédesz & Kiss Gábor Dávid, 2020. "Spillover effects of unconventional monetary policy on capital markets in the shadow of the Eurozone: A sample of non-Eurozone countries," Review of Economic Perspectives, Sciendo, vol. 20(2), pages 171-195, June.

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    More about this item

    Keywords

    Unconventional monetary policy; Tail risks; Interdependence;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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