Evaluating asset-market effects of unconventional monetary policy: a multi-country review

Rogers, John H.; Scotti, Chiara; Wright, Jonathan H.

doi:10.1111/1468-0327.12042

Cited by 288 publications

(265 citation statements)

References 43 publications

Supporting

Mentioning

237

Contrasting

Unclassified

Order By: Relevance

“…It is therefore closer to studies such as Rogers et al (2014) who show that ECB monetary policy surprises had a positive impact on stock markets, led to a compression in spreads between core and periphery euro area countries and an appreciation of the euro exchange rate, at least until 2014, the period covered by their study. During this first phase, the confidence channel was the predominant channel of transmission, as the ECB promoted financial stability and confidence in the integrity of the eurozone.…”

Section: Related Literaturesupporting

confidence: 52%

“…Monetary policy surprises are calculated using an approach similar to Rogers et al (2014). The surprises (∆i …”

Section: Ecb Unconventional Monetary Policies and Identification Stramentioning

confidence: 99%

“…However, as regards long-term rates, the choice of the benchmark for the euro area is not straightforward. One candidate could be the Bund-yield, but, as noted by Rogers et al (2014), price changes in Bund prices may be driven by safe-haven motives, in particular at the peak of the euro area crisis in 2012, rather than by changes in the expected future path of long-term interest rates. A positive surprise that removes uncertainty in the market and reduces risk premia would lead to an increase in equity market valuations, but it might lead to a decrease in Bund prices, since holdings of safe haven asset become less attractive.…”

mentioning

confidence: 99%

“…a loosening of the monetary policy, we use the inverse of the average change in the 10-year sovereign bond yields of Germany, Italy and Spain, so that a decline in the average yield would correspond to a monetary policy easing. This approach bears some similarities to Rogers et al (2014) who use the spread between German and Italian bonds for the identification of monetary policy surprises in the euro area. Our approach has the advantage that we would identify both a decrease in sovereign risk through a tightening of the spreads and a simultaneous decrease in all three rates as a positive monetary policy surprise, for instance an easing announcement such as the launch of the APP that shifted the yield curve downward.…”

mentioning

confidence: 99%

See 3 more Smart Citations

The portfolio of euro area fund investors and ECB monetary policy announcements

Bubeck

Habib

Manganelli

2018

Journal of International Money and Finance

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. bond prices, without affecting the positions that arbitrageurs hold in equilibrium and therefore they do not affect risk premia. As a consequence, the signalling channel should not have an impact on active reallocation (due to actual changes in portfolio shares), but should have an impact on passive reallocation (due to the effects on prices). Terms of use: Documents inA second important channel, which typically goes under the name of Portfolio Balance Channel, works through the effect that monetary policy operations have on risk premia. For instance, according to preferred habitat models, following surprises in purchases of long term Treasury bonds by the central bank, investors will be forced to hold smaller positions in long term bonds and bear less duration risk, which in turn will lead to a decrease in risk premia and an increase in bond prices.Therefore, monetary policy shocks associated with the portfolio balance channel should have an impact both on the active and on the passive reallocation of investors. ECB Working Paper No 2116 / December 2017 2Our main findings show that the ECB monetary policy did not lead to significant active reallocation in the portfolio of euro area fund investors. Instead, our empirical findings provide robust evidence that the class of fund investors are affected by monetary policy mainly through the impact it has on asset prices and exchange rates by changing expectations of future interest rates (the signalling channel). The significant valuation effects associated with these price movements passively shifted the asset allocation of euro area fund investors towards riskier securities, like funds investing in European and Emerging Market equity, and away from European bond funds. These effects are more pronounced for unconventional measures, such as the Asset Purchase Programme (APP).Overall, our empirical evidence is consistent with monetary policy affecting unsophisticated investors' behaviour via the signalling channel, rather than the portfolio balance channel. Our results are also consistent with the empirical evidence on the behaviour of investors in mutual funds, who are generally reluctant to sell past winners, and the growing literature on rational inattention, predicting that unsophisticated investors adjust their portfolios only rarely.

show abstract

Section: Related Literaturesupporting

confidence: 52%

“…Monetary policy surprises are calculated using an approach similar to Rogers et al (2014). The surprises (∆i …”

Section: Ecb Unconventional Monetary Policies and Identification Stramentioning

confidence: 99%

mentioning

confidence: 99%

mentioning

confidence: 99%

See 2 more Smart Citations

The portfolio of euro area fund investors and ECB monetary policy announcements

Bubeck

Habib

Manganelli

2018

Journal of International Money and Finance

View full text Add to dashboard Cite

show abstract

“…The strong effects that Neely found on international asset markets are consistent with the results of Ait-Sahalia, Andritzky, Jobst, Nowak and Tamirisa (2012), who found positive international spillovers from domestic financial market interventions and with Rogers, Scotti, and Wright (2014), who compared unconventional policy shocks from the Federal Reserve Bank of England, European Central Bank and Bank of Japan, finding that U.S. shocks exhibited the greatest international spillovers. Bowman, Londono and Sapriza (2015) use the identificationthrough-heteroskdasticity methods of Rigobon (2003) and Wright (2012) to identify US monetary policy shocks on sovereign bond yields, USD foreign exchange rates and stock prices.…”

Section: Us Treasury Housing and Corporate Bondssupporting

confidence: 84%

An Analysis of the Literature on International Unconventional Monetary Policy

Bhattarai

Neely

2016

View full text Add to dashboard Cite

This paper reviews and critically evaluates the empirical literature on the effects of U.S. unconventional monetary policy on both financial markets and the real economy. In order to understand how such policies could work, we also briefly review the literature on the theory of such policies. We show that event studies provide very strong evidence that U.S. unconventional policy announcements have strongly influenced international bond yields, exchange rates, and equity prices in the desired manner. In addition, such studies indicate that such policies curtailed market perceptions of extreme events. Calibrated modeling and vector autoregressive (VAR) exercises strongly suggest that these policies significantly improved macroeconomic outcomes, raising U.S. GDP and CPI, through these changes in asset prices. Both event studies and VARs imply positive international spillovers of such policies.

show abstract

What does unconventional monetary policy do to stock markets in the euro area?

Chebbi

2018

Int. J Fin Econ

View full text Add to dashboard Cite

This paper investigates the impact of the European Central Bank's unconventional monetary surprises on major European stock markets. Three measures for surprises are used: (a) the change in domestic 10‐year government bond yields, (b) the change in the spread between German and Italian (Spanish) 10‐year bond yields, and (c) the change in yields of a safe euro‐denominated asset, such as German bonds. I show that unconventional monetary policy surprises significantly influence stock returns. For instance, monetary decisions that cause a decrease in Italian (Spanish) sovereign spread led to an increase in the stock returns. In addition, I find that a positively surprising shock—a fall in the domestic bond yield and an increase in German interest rates—leads to higher stock returns. Finally, sovereign spreads seemed to have larger effects on stock returns both during crisis and postcrisis years.

show abstract

Evaluating asset-market effects of unconventional monetary policy: a multi-country review

Cited by 288 publications

References 43 publications

The portfolio of euro area fund investors and ECB monetary policy announcements

The portfolio of euro area fund investors and ECB monetary policy announcements

An Analysis of the Literature on International Unconventional Monetary Policy

What does unconventional monetary policy do to stock markets in the euro area?

Contact Info

Product

Resources

About