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Original Articles

The international impact of US unconventional monetary policy

Pages 955-959 | Published online: 12 Dec 2014
 

Abstract

Using a structural factor-augmented vector autoregression model and a large data set of daily time series, we study the impact of US unconventional monetary policy on British and German financial markets. Our findings indicate that a surprise US unconventional monetary policy easing leads to increased equity returns and lower government bond yields for both Germany and the United Kingdom. These effects then nearly completely dissipate after approximately 750 days.

JEL Classification:

Notes

1 See, for example, D’Amico and King (Citation2013), Doh (Citation2010), Duygan-Bump et al. (Citation2013), Fuster and Willen (Citation2010), Glick and Leduc (Citation2013), Gagnon et al. (Citation2011), Hamilton and Wu (Citation2012), Hancock and Passmore (Citation2011, Citation2012, Citation2014), Krishnamurthy and Vissing-Jorgensen (Citation2011), Swanson (Citation2011) and Swanson and Williams (Citation2014).

2 More specifically, this data set includes 2- and 10-year zero coupon US Treasuries; the 5 year and forward 5-to-10-year TIPS break-even rates; Moody’s AAA and BAA seasoned corporate bond yields; the corporate default spread (BAA–AAA), returns on the S&P500 and Dow Jones Industrial Average; the VIX index; the returns on exchange traded funds that track real estate investment trusts and homebuilders; the ABX AAA index, ABX AA index, and the ABX Risk Premium; the CMBX index; the US-Euro, US-Pound and US-Yen exchange rates; the yields on Fannie Mae mortgage backed securities (MBS); and the spread between Fannie Mae MBS yields and the 30-year Treasury. See Gabriel and Lutz (Citation2014) for more details.

3 The international data were downloaded from Bloomberg. The Bloomberg symbols are as follows: German 2-year zero coupon bonds (F91002Y); German 10-year coupon bonds (F91010Y); German stock returns (DAX); UK 2-year zero coupon bonds (I02202Y); UK 10-year coupon bonds (I02210Y); UK stock returns (UKX).

4 For further details see Bernanke et al. (Citation2005), Boivin et al. (Citation2009) and Gabriel and Lutz (Citation2014). See also Vargas-Silva (Citation2008), Gupta et al. (Citation2010), Lombardi et al. (Citation2012) and Lutz (Citation2014).

5 See also Rigobon (Citation2003), Rigobon and Sack (Citation2003, Citation2004, Citation2005), Gabriel and Lutz (Citation2014) and Lutz (Citation2014).

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