Time-varying impact of monetary policy shocks on US stock returns: The role of investor sentiment

The boom of housing market in China in recent years has attracted great concerns from all over the world. How monetary policy affects house prices in China becomes an essential topic. This paper studies the time-varying effects of monetary policy on house prices in China during 2005.7-2017.10, by using a time-varying parameter VAR model. This paper obtains three interesting results. First, there are time-varying features of the responses of house prices to monetary policy shocks half-year and 1-year ahead, no matter through interest rate channel or through credit channel. Second, interest rate channel and credit channel have been enhanced since financial crisis in 2008. Third, the responses of nominal house prices to monetary policy in China are mainly driven by the responses of real house prices, instead of inflation. Finally, this paper gives proper suggestions for each finding respectively to central bank in China.

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Monetary policy shocks and financially constrained stock returns: The effects of the financial crisis

International Review of Financial Analysis ◽

10.1016/j.irfa.2018.05.001 ◽

2018 ◽

Vol 58 ◽

pp. 69-90 ◽

Cited By ~ 1

Author(s):

Nikolaos Balafas ◽

Chris Florackis ◽

Alexandros Kostakis

Keyword(s):

Monetary Policy ◽

Financial Crisis ◽

Stock Returns ◽

Monetary Policy Shocks ◽

Policy Shocks

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MONETARY POLICY, HOUSING BOOMS, AND FINANCIAL (IM)BALANCES

Macroeconomic Dynamics ◽

10.1017/s1365100511000721 ◽

2012 ◽

Vol 17 (4) ◽

pp. 830-860 ◽

Cited By ~ 46

Author(s):

Sandra Eickmeier ◽

Boris Hofmann

Keyword(s):

Monetary Policy ◽

Private Sector ◽

Global Financial Crisis ◽

House Prices ◽

Monetary Policy Shocks ◽

Balance Sheets ◽

Vector Autoregressive ◽

Policy Shocks ◽

The Global Financial Crisis

This paper applies a factor-augmented vector autoregressive model to U.S. data with the aim of analyzing monetary transmission via private sector balance sheets, credit risk spreads, and house prices and of exploring the role of monetary policy in the housing and credit boom prior to the global financial crisis. We find that monetary policy shocks have a persistent effect on house prices, real estate wealth, and private sector debt and a strong short-lived effect on risk spreads in money and mortgage markets. Moreover, the results suggest that monetary policy contributed considerably to the unsustainable precrisis developments in housing and credit markets. Although monetary policy shocks contributed discernibly at a late stage of the boom, feedback effects of other (macroeconomic and financial) shocks via lower policy rates kicked in earlier and appear to have been considerable.

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The Time-Varying Effect of Monetary Policy on Asset Prices

Review of Economics and Statistics ◽

10.1162/rest_a_00840 ◽

2020 ◽

Vol 102 (4) ◽

pp. 690-704 ◽

Cited By ~ 8

Author(s):

Pascal Paul

Keyword(s):

Monetary Policy ◽

Asset Prices ◽

House Prices ◽

The United States ◽

Model Parameters ◽

Time Varying ◽

Real Economy ◽

Monetary Policy Shocks ◽

Vector Autoregressive ◽

Policy Shocks

This paper studies how monetary policy jointly affects asset prices and the real economy in the United States. I develop an estimator that uses high-frequency surprises as a proxy for the structural monetary policy shocks. This is achieved by integrating the surprises into a vector autoregressive model as an exogenous variable. I use current short-term rate surprises because these are least affected by an information effect. When allowing for time-varying model parameters, I find that compared to the response of output, the reaction of stock and house prices to monetary policy shocks was particularly low before the 2007–2009 financial crisis.

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Identifying conventional and unconventional monetary policy shocks: a latent threshold approach

The B E Journal of Macroeconomics ◽

10.1515/bejm-2015-0074 ◽

2016 ◽

Vol 16 (1) ◽

Cited By ~ 6

Author(s):

Takeshi Kimura ◽

Jouchi Nakajima

Keyword(s):

Monetary Policy ◽

Interest Rates ◽

Regime Switching ◽

Structural Var ◽

Var Model ◽

Recursive Identification ◽

Time Varying ◽

Unconventional Monetary Policy ◽

Monetary Policy Shocks ◽

Policy Shocks

AbstractThis paper proposes a new estimation framework for identifying monetary policy shocks in both conventional and unconventional policy regimes using a structural VAR model. Exploiting a latent threshold modeling strategy that induces time-varying shrinkage of the parameters, we explore a recursive identification switching with a time-varying overidentification for the interest rate zero lower bound. We empirically analyze Japan’s monetary policy to illustrate the proposed approach for modeling regime-switching between conventional and unconventional monetary policy periods, and find that the proposed model is preferred over a nested standard time-varying parameter VAR model. The estimation results show that increasing bank reserves lowers long-term interest rates in the unconventional policy periods, and that the impulse responses of inflation and the output gap to a bank reserve shock appear to be positive but highly uncertain.

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Do foreign banks in India respond to global monetary policy shocks? A SVAR analysis

Studies in Economics and Finance ◽

10.1108/sef-10-2019-0417 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Ameen Omar Shareef ◽

K.P. Prabheesh

Keyword(s):

Monetary Policy ◽

Bank Lending ◽

Foreign Bank ◽

Foreign Banks ◽

Monetary Policy Shocks ◽

Content Type ◽

Indian Economy ◽

Policy Shocks ◽

The Impact

Purpose This paper aims to examine the role of foreign banks in transmitting global monetary policy shocks to India. Further, the authors try to explore the international bank lending channel and analyze the impact of global monetary policy on Indian macroeconomic variables. Design/methodology/approach The authors use a structural break unit root test and structural vector autoregression on monthly data from 1998 to 2018. Findings The study finds that the global monetary policy is significantly determining foreign banks’ lending in India; the evidence of a portfolio re-balancing channel in the process of global monetary policy transmission to the Indian economy; the exchange rate is significantly explaining the foreign bank credit dynamism in India; and evidence of international monetary policy spillover to the Indian economy. Originality/value This is the first attempt to analyze the role of foreign banks in the transmission of global monetary policy shocks to India, where the literature availability is limited. The finding of ineffective domestic monetary policy on foreign bank lending opens the need for an in-depth and diversified analysis of the role of foreign banks in the transmission of domestic monetary policy.

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