International Spillovers from US Forward Guidance to Equity Markets

23 Pages Posted: 3 Jul 2014

See all articles by Richhild Moessner

Richhild Moessner

Bank for International Settlements (BIS)

Date Written: July 1, 2014

Abstract

We quantify the international spillovers of explicit FOMC policy rate guidance used as an unconventional monetary policy tool at the zero lower bound of the policy rate on international equity markets, considering equity indices of both advanced and emerging economies. We find that explicit FOMC policy rate guidance announcements at the zero lower bound led to higher equity prices in a number of advanced and emerging economies. Moreover, we find that equity indices of economies with lower sovereign ratings rose by more, consistent with the risk-taking channel of monetary policy.

Keywords: Monetary policy, forward guidance, equity prices, international spillovers

JEL Classification: E52, E58

Suggested Citation

Moessner, Richhild, International Spillovers from US Forward Guidance to Equity Markets (July 1, 2014). De Nederlandsche Bank Working Paper No. 427, Available at SSRN: https://ssrn.com/abstract=2461687 or http://dx.doi.org/10.2139/ssrn.2461687

Richhild Moessner (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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