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Stock market evidence on the international transmission channels of US monetary policy surprises

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  • Maurer, Tim D.
  • Nitschka, Thomas

Abstract

We reveal the economic sources of the stock market responses of 40 countries to US monetary policy surprises by decomposing stock market returns into components reflecting investors’ revisions in expectations (news) about future cash flows and different components of discount rates. US monetary policy surprises have persistent effects on foreign stock markets because they primarily constitute cash flow news. This finding pertains to different measures of the surprises. The liquidity of stock markets and the perceived country risk affect the sensitivities of unexpected stock market returns to the US monetary policy surprises while other country characteristics, e.g., the exchange rate regime, have no effect.

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  • Maurer, Tim D. & Nitschka, Thomas, 2023. "Stock market evidence on the international transmission channels of US monetary policy surprises," Journal of International Money and Finance, Elsevier, vol. 136(C).
    • Handle: RePEc:eee:jimfin:v:136:y:2023:i:c:s0261560623000670
    DOI: 10.1016/j.jimonfin.2023.102866
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    More about this item

    Keywords

    International spillovers; News; Monetary policy; Stock returns; Vector autoregression;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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