Spillover effects of the US monetary policy on the Indian trilemma

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Harpreet Singh Grewal ◽  
Pushpa Trivedi
Keyword(s):  
Monetary Policy ◽  
Event Study ◽  
Spillover Effects ◽  
Subject Area ◽  
Open Market ◽  
Content Type ◽  
Study Approach ◽  
The Us ◽  
The Impact ◽  
Us Monetary Policy

PurposeThe purpose of this paper is to investigate the impact of the US unconventional monetary policy surprises on the management of trilemma in India.Design/methodology/approachThis paper uses the event study approach along with OLS and MANOVA to examine the impact.FindingsThe results validate the existence of trilemma in India for the period from October 2008 to December 2017. The results also show that monetary policy independence still exists in India in the wake of greater spillover effects during the Federal Open Market Committee announcement days. The spillover effects on USD-INR exchange rates and capital flows are found to be statistically significant. The MANOVA results show that the trilemma in India is influenced by around 20% by the changes in the US monetary policy.Originality/valueThe above approach of event study combined with MANOVA in this subject area has not been used before to the best of the authors’ knowledge. Further, there are only a few studies that exist on the spillover effects of the US monetary policy actions on the management of trilemma in India.

Spillover effects of the US monetary policy normalization on African stock markets

2020 ◽  
Vol 22 (1) ◽  
pp. 3-19
Author(s):  
Ebere Kalu ◽  
Chinwe Okoyeuzu ◽  
Angela Ukemenam ◽  
Augustine Ujunwa
Keyword(s):  
Monetary Policy ◽  
Financial Market ◽  
Stock Prices ◽  
Spillover Effects ◽  
African Countries ◽  
Treasury Bill ◽  
Content Type ◽  
The Us ◽  
Economic Bloc ◽  
Us Monetary Policy

PurposeWe study the contemporaneous effects of US monetary policy normalization on African stock market using panel data from six African countries.Design/methodology/approachDaily data from May 1, 2013 to December 31, 2018 were used in order to accommodate the announcement effects since the US monetary policy normalization announcement was made in May 2013, while the rate hike was in December 2015. The study used the FE, RE and PMG models.FindingsThe results revealed that US 10-year bond yield and Treasury bill rate shocks negatively affect stock prices in Africa. S$P500 shock positively affects African stock prices.The result revealed that the integration of African financial market to the global financial market is a major source of vulnerability. The finding that US Treasury bill rate is a major depressant of the African stock prices reveals the short-termism of foreign polio inflows into African economies.Originality/valueWe provide inexorably insight into the interplay of financial systems globally. It can be useful for the purposes of generalization in developing economies in the shape of African countries. More so, this study could be replicated in another economic bloc or region with the aim of further exposing the far-reaching spillover effects of the US monetary policy normalization.

Modelling sectoral spillovers in the USA (1992–2015)

2020 ◽  
Vol 47 (3) ◽  
pp. 561-595
Author(s):  
Konstantinos N. Konstantakis ◽  
Panayotis G. Michaelides ◽  
Theofanis Papageorgiou ◽  
Theodoros Daglis
Keyword(s):  
Information Technology ◽  
General Equilibrium ◽  
Methodological Approach ◽  
Robustness Analysis ◽  
Autoregressive Process ◽  
Spillover Effects ◽  
Content Type ◽  
Us Economy ◽  
The Us ◽  
The Impact

PurposeThis research paper uses a novel methodological approach to investigate the spillover effects among the key sectors of the US economy.Design/methodology/approachThe paper links the US sectors via a node theoretic scheme based on a general equilibrium framework, whereas it estimates the general equilibrium equation as a Global Vector Autoregressive process, taking into consideration the potential existence of dominant units.FindingsBased on our findings, the dominant sector in the US economy, for the period 1992–2015, is the sector of information technology, finance and communications, a fact that gives credence to the view that the US economy is a service-driven economy. In addition, the US economy seems to benefit by the increased labour mobility across knowledge-intensive sectors, thus avoiding the ‘employment trap’ which in turn enabled the US economy to overcome the financial crisis of 2007.Originality/valueFirstly, the paper models by means of a network approach which is based on a general equilibrium framework, the linkages between the US sectors while treating the sector of information, technology, communications and finance as dominant, as dictated by its degree of centrality in the network structure. Secondly, the paper offers a robustness analysis regarding both the existence and the identification of dominant sectors (nodes) in the US economy. Thirdly, the paper studies a wide period, namely 1992–2015, fully capturing the recent global recession, while acknowledging the impact of the global crisis through the introduction of the relevant exogenous dummy variables; Lastly and most importantly, it is the first study to apply the GVAR approach in a network general equilibrium framework at the sectoral level.

Central bank action will drive global equity markets

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Equity Markets ◽  
Economic Data ◽  
Equity Prices ◽  
Monetary Policies ◽  
Content Type ◽  
Market Sentiment ◽  
The Us ◽  
Us Monetary Policy

Significance This volatility is driven by expectations of further monetary stimulus in response to a slowing economy. Despite persistent concerns about the fallout from the anticipated tightening in US monetary policy and many country-specific risks, such as the standoff between Greece and its creditors, equity market sentiment remains supported by accommodative monetary policies worldwide and expectations of the US monetary policy tightening being gradual. Impacts Market volatility could increase further, as better-than-expected economic data in the euro-area vies with weaker-than-anticipated US data. Decoupling of surging equity prices and weak economic fundamentals threatens the rally's sustainability, increasing scope for volatility. This decoupling is most pronounced in China, where weak economic data prompt buying of equities in anticipation of stimulus measures. The greatest risk in equity markets is uncertainty surrounding US interest rates and their impact on emerging markets.

scholarly journals External effects of US monetary policy

2018 ◽  
Vol 11 (2) ◽  
pp. 82-99
Author(s):  
M. Yu. GOLOVNIN
Keyword(s):  
Monetary Policy ◽  
Emerging Markets ◽  
Interest Rates ◽  
Capital Flows ◽  
Treasury Bills ◽  
The Us ◽  
National Economies ◽  
The Impact ◽  
Us Monetary Policy

The article focuses on the changes in US monetary policy since the  beginning of the 21st century and reveals the impact of this policy  on the national economies of other countries, especially emerging markets. The US monetary policy influenced the emerging  markets both through the real and financial channels. Through the  latter, the main impact was on the Treasury bills rates and on the  exchange rates. At the same time, the influence on different  countries varied in different periods. For example, interest rates in  Thailand, Mexico and Pakistan before the global economic and  financial crisis in general followed the cycle of US monetary policy.  The “quantitative easing” policy, the statements and the follow-up  actions to abolish it, have influenced cross-border capital flows to  emerging markets. A number of countries, including Russia,  experienced the impact of US monetary policy through the dynamics  of oil prices. Emerging markets face restrictions on their monetary  policy from the US monetary policy, but in practice they seek to  circumvent them through exchange rate regulation, restrictions on  crossborder capital flows and the pursuit of an independent monetary policy, not following the  cycles of interest rate changes in the US.

Fed move boosts tight Latin American monetary policy

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Latin American ◽  
Commodity Prices ◽  
Content Type ◽  
The Us ◽  
Capital Outflows ◽  
Government Bond Markets ◽  
The Impact ◽  
First Time

Subject The impact of US monetary policy tightening. Significance Following the US Federal Reserve's (Fed) historic decision to raise rates for the first time since 2006, the start of the Fed's monetary tightening cycle is accentuating the hawkish stance of Latin America's main central banks. This comes amid a dramatic sell-off in commodity markets, persistent concerns about China's economy and a severe deterioration in economic conditions across the region. Impacts EM asset prices have remained relatively resilient to the rise in US interest rates, in stark contrast to the 'taper tantrum' in 2013. Hitherto-resilient regional local currency government bond markets will face foreign capital outflows due to falling commodity prices. The Brazilian real is 2015's worst-performing major EM currency, but due largely to political and economic difficulties at home.

Stock returns and the US dollar: the importance of monetary policy

2015 ◽  
Vol 41 (10) ◽  
pp. 1046-1058 ◽  
Author(s):  
J. Christopher Hughen ◽  
Scott Beyer
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Stock Returns ◽  
Foreign Exchange ◽  
Stock Prices ◽  
Factor Model ◽  
Consumer Spending ◽  
Content Type ◽  
The Us ◽  
The Impact

Purpose – In the increasingly globalized economy, foreign exchange fluctuations have multiple, conflicting effects on domestic stock prices. The purpose of this paper is to examine return data to determine the relation between the dollar’s value and stock prices as it relates to monetary policy. Design/methodology/approach – The authors examine US stock returns over a 40-year period, which is classified according to monetary policy and dollar trend. To better understand the impact of foreign exchange fluctuations, the authors estimate a model of stock returns using the three Fama-French factors and a momentum factor. Then the authors explore the underlying economic fundamentals that drive the sharp difference in annual returns between periods when the dollar is in an uptrend trend with loose monetary policy and periods when the dollar is in a downtrend with tight monetary policy. Findings – Over the last 40 years, US stock returns were 2.5 times higher when the dollar was trending up vs down. The factor model of returns shows that equity returns are positively associated with periods when the dollar appreciated. Returns were particularly high when the dollar was in an uptrend during accommodative monetary policy. During these periods, stocks in the consumer goods and services industries provided relatively high returns. This occurred with strong economic growth due to consumer spending. Stocks exhibited the lowest returns when the dollar was depreciating and the Federal Reserve was tightening. Originality/value – The key contribution of the research is that currency trends should be analyzed in the light of monetary policy. During periods of accommodative monetary policy and dollar appreciation, the US stock market provided average returns of 18.7 percent compared to −3.29 percent during a period of restrictive monetary policy and dollar depreciation. This result is driven by stronger economic growth, which is composed of consumer spending that more than offsets the dollar’s impact on net exports.

scholarly journals Spillover Effect of US Monetary Policy to ASEAN Stock Market

2019 ◽  
Vol 15 (2) ◽  
pp. 232-242
Author(s):  
Aniek Hindrayani ◽  
Fadikia K Putri ◽  
Inda F Puspitasari
Keyword(s):  
Monetary Policy ◽  
Stock Market ◽  
Markov Switching ◽  
Spillover Effect ◽  
Spillover Effects ◽  
Bear Market ◽  
Bull Market ◽  
The Us ◽  
Recession Period ◽  
Us Monetary Policy

Abstract: This study analyzes the spillover effects of the US monetary policy on the ASEAN stock market with Markov switching model and investigates differences in empirical results of each country from ASEAN member. The results of this study have important implications for asset price allocation, specifically in the case of a transition between US and other small countries. The results showed that the ASEAN stock market is more affected by the US interest rates during bull-market than bear-markets. This can be seen from the increasing of stock market volatility during expansion comparing with recession period. Therefore, the stock markets of ASEAN countries will not be easily affected by the dollar rate during financial crisis or the recession period. Keywords: stock market, monetary policy, spillover effect, Markov-switching modelEfek Spillover pada Perubahan Kebijakan Moneter Amerika Terhadap Stock Market di ASEANAbstrak: Penelitian ini menganalisis efek spillover akibat adanya perubahan kebijakan moneter Amerika terhadap stock market di ASEAN dengan model Markov switching dan menginvestigasi terkait ada atau tidaknya perbedaan pada hasil empiris di setiap negara anggota ASEAN. Hasil penelitian ini memberikan implikasi penting bagi mekanisme transisi harga aset, khususnya dari Amerika terhadap negara dengan skala perekonomian kecil. Hasil penelitian menunjukkan bahwa stock market ASEAN lebih mudah terpengaruh oleh tingkat suku bunga Amerika pada saat kondisi bull-market dibandingkan saat bear-market. Hal ini dapat dilihat dari tingginya volatilitas stock market pada saat ekspansi dibandingkan saat periode resesi, sehingga stock market negara-negara ASEAN tidak akan mudah terpengaruh oleh dollar pada saat perekonomian mengalami krisis atau saat periode resesi. Kata kunci: stock market, kebijakan moneter, spillover effect, model Markov-switching

scholarly journals Monetary Policy Announcements and Market Interest Rates in Pakistan: An Event Study Approach.

2011 ◽  
Vol 50 (4II) ◽  
pp. 821-839
Author(s):  
Habib-ur-Rahman Habib-ur-Rahman ◽  
Hasan M. Mohsin
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Event Study ◽  
Positive Impact ◽  
Abnormal Returns ◽  
Event Window ◽  
Significant Evidence ◽  
Study Approach ◽  
Arch Effect ◽  
The Impact

The objective of this paper is to analyse the impact of monetary policy (MP) announcements on market interest rates at different nine maturities (1/Week, 2/Week, 1/Month, 3/Months, 6/Months, 9/Months, 1/Year, 2/Years and 3/Years) in Pakistan. The Event window of 11 days and an estimation window of 250 days have been used for analysis. The study did not find significant evidence of ARCH effect in market interest rates at (1/Year, 2/Years and 3/Years) maturities. However, there is evidence of significant abnormal returns which shows a positive impact of monetary policy announcements on market interest rates at different nine maturities. Keywords: Monetary Policy, Market Interest Rates, Normal Rates, Abnormal Rates, GARCH, ARIMA

scholarly journals US vs. Euro Area

2019 ◽  
Vol 19 (199) ◽  
Author(s):  
Eugenio Cerutti ◽  
Carolina Osorio Buitron
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
Negative Impact ◽  
Financial Sector ◽  
Bank Lending ◽  
Real Sector ◽  
Cross Border ◽  
The Us ◽  
The Impact ◽  
Us Monetary Policy

This paper analyzes the drivers of cross-border bank lending to 49 Emerging Markets (EMs) during the period 1990Q1-2014Q4, by assessing the impact of monetary, financial and real sector shocks in both the US and the euro area. The literature has traditionally highlighted the influence of US monetary policy on driving cross-border bank flows, and more recently the importance of both US and Euro Area (EA) financial/banking sectors’ related variables. Our contribution is the simultaneous analysis of the role of these US and EA drivers, as well as their interactions with real sector shocks. We corroborate the negative impact of US monetary policy tightening on cross-border lending to EMs, but we find that EA monetary policy seems to have an impact mostly on Emerging Europe, reflecting the fact that cross-border lending to most other EM regions is dollar denominated. We also find that real sector shocks in both the US and EA trigger an increase in cross-border lending, but less in EA when modeling the financial sector. Finally, for financial sector shocks, such as those associated with a decrease in bank leverage, our results indicate a broad-based overall contraction of cross-border lending if the shock originates in the US, and heterogenous effects across borrowing regions if the shock originates in the EA.

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