International spillovers into Asian stock markets under the unconventional monetary policies of advanced countries

The spillover of shadow interest rate to the excess returns in emerging markets

“…Similar findings were obtained for the increase in the shadow interest rate for the CRASERI, and it can be suggested that contractionary monetary policy shocks in the U.S. can reduce the excess returns in the multiple-asset class in the long run. Considering the entire sample framework, it was also found that there are long-term asymmetric shock spillovers between the shadow interest rate of the U.S. and the FXERI and between the shadow interest rate of the U.S. and the CRASERI over the positive statistically significant 12 and 22 coefficients, in line with Ames et al (2017) and Sugimoto and Matsuki (2019). In the light of these findings, it can be suggested that high shock and asymmetric information shocks in the shadow interest rate of the U.S. will have crucial effects on both variables.…”

“…At this point, the fact that the monetary policy implementation is subject to a rule emerges as an influential factor for the dynamics of the financial markets of emerging countries and the expectations of economic agents. More specifically, the coefficient expressed by 12 of the VARMA-BEKK-AGARCH model showed the shock spillovers among the variables in the short-run, parallel to Sugimoto and Matsuki (2019). Accordingly, it can be argued that shocks in the shadow interest rate of the U.S., in other words, unexpected developments that were not in line with the monetary policy rule, deteriorated the expectations related to the financial markets of the emerging markets and reduced the value of the FXERI and the CRASERI in line with Ammer et al (2019), Caraiani and Călin (2018), Inoue and Rossi (2019), and Lee (2019).…”

“…Contrary to the studies in the scientific literature, Caraiani & Călin (2018) suggested that, when the shadow interest rate was included in the time-varying Bayesian VAR model, the impact of monetary policy shocks on asset prices was negative and the impact on asset price bubbles was smaller in the aftermath of the GFC. On the other hand, Sugimoto and Matsuki (2019) showed a significant international spillover effect of monetary policy on the asset price bubbles in emerging countries. More specifically, Sugimoto and Matsuki (2019) employed the measure of Diebold and Yilmaz (2012), and they found that both conventional and unconventional monetary easing raised the US-to-Asia and Japan-to-Asia stock return spillovers.…”

“…On the other hand, Sugimoto and Matsuki (2019) showed a significant international spillover effect of monetary policy on the asset price bubbles in emerging countries. More specifically, Sugimoto and Matsuki (2019) employed the measure of Diebold and Yilmaz (2012), and they found that both conventional and unconventional monetary easing raised the US-to-Asia and Japan-to-Asia stock return spillovers. Since they also found that the reaction of bubbles to shadow interest rate was lower than the federal funds rate, the importance of detecting the effects of shadow interest rates on financial variables was suggested.…”

Financial Spillovers in Asian Emerging Economies

“…The extracted financial shocks allow us to investigate the size of regional spillovers from Asian common financial shocks. A number of studies have suggested growing regional integration in Asian financial markets (see, for example, Yu, Fung, and Tam 2010;Boubakri and Guillaumin 2015;Komatsubara, Okimoto, and Tatsumi 2017;Mensah and Premaratne 2017;Didier, Llovet, and Schmukler 2017;and Sugimoto and Matsuki 2018). Given financial integration in Asia, it is important to estimate regional spillovers excluding spillovers from country-specific shocks.…”