Financial Crisis, US Unconventional Monetary Policy and International Spillovers

Abstract

We study the impact of the US quantitative easing (QE) on both the emerging and advanced economies, estimating a global vector error-correction model (GVECM) and conducting counterfactual analyses. We focus on the effects of reductions in the US term and corporate spreads. First, US QE measures reducing the US corporate spread appear to be more important than lowering the US term spread. Second, US QE measures might have prevented episodes of prolonged recession and deflation in the advanced economies. Third, the estimated effects on the emerging economies have been diverse but often larger than those recorded in the US and other advanced economies. The heterogeneous effects from US QE measures indicate unevenly distributed benefits and costs.

Predictive Power of us Monetary Policy Uncertainty Shock on Stock Returns in Australia and New Zealand

“…No causality is detected for the rest of the cases. However, the conclusions of bootstrap full‐sample Granger causality test cannot suggest the impacts of US MPU on Australia and New Zealand's stock returns, which is contrast to the conclusions of those previous studies which confirm the international spillovers of US monetary policy on foreign countries’ stock market (Chen et al, ). Here, we infer that the full‐sample Granger causality cannot give satisfied empirical evidence to the causal nexus between the US MPU and Australia and New Zealand's stock returns.…”

“…After an adjustment from 2009 to 2012, the index exhibits a bully trend from 3500 points to 7817 points. As mentioned above, the international spillovers of policy uncertainties have been confirmed from US monetary policy on financial markets of foreign countries (Chen et al, ; Christou et al, ). However, the path of stock market in Australia and New Zealand is not likely to be affected by the increasing level of US MPUs since 2013, though without statistical evidence in existing studies.…”

“…Chen et al . () implement a global vector error‐correction model (GVECM) to re‐examine the predictive power of the international spillovers from US unconventional monetary policy to emerging market countries, that is, Brazil and China. The findings obtained confirm that US unconventional monetary policy would indeed overheat the financial market in Brazil and China in 2010 and 2011.…”

Effects of Monetary and Macroprudential Policies—Evidence from Four Inflation Targeting Economies

“…This is motivated by the potential impact of monetary policy and real activity in the United States on the real economy, financial conditions, and monetary policy in the Asia-Pacific region. The cross-border impact of monetary policy in the United States has been highlighted in several recent studies; see, for example, McCauley, McGuire, and Sushko (2015), Kim and Shin (2015), and Chen et al (2016).…”

Monetary policy responses of Asian countries to spillovers from US monetary policy

“…2 In these studies, the effects are normally considered under the assumption of the use of conventional tools of monetary policy (by the source country); although several recent studies look at the effects of unconventional tools of monetary stimulus that many central banks experimented with after the GFC. The US or the Euro area usually represent the source country due to their relatively influential position in the world economy (see, for example, Beckworth and Crowe 2013, Chen et al 2016, Edwards 2016, Potjagailo 2017, Gagnon et al 2017, Ma ckowiak 2007, Neely 2010, Rey 2016, Roger et al 2013, Punzi and Chantapacdepong 2017, Taylor 2013. Claus et al (2016) examine how shocks to US and Japanese monetary policy affect their own asset market and the spillover into each other's market for the period from January 1998 to June 2015.…”