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International Transmission of U.S. Monetary Policy Shocks: Evidence from Stock Prices
Author(s) -
AMMER JOHN,
VEGA CLARA,
WONGSWAN JON
Publication year - 2010
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2010.00333.x
Subject(s) - monetary policy , monetary economics , economics , stock (firearms) , transmission channel , equity (law) , interest rate , credit channel , exchange rate , transmission (telecommunications) , inflation targeting , mechanical engineering , electrical engineering , political science , law , engineering
This paper analyzes intraday changes in firm‐level equity prices around interest rate announcements to assess the transmission of U.S. monetary policy to the global economy. We document that foreign firms on average are roughly as sensitive to U.S. monetary policy as U.S. firms, although we also find considerable cross‐sectional variation across firms. In particular, foreign stocks in cyclically sensitive industries show stronger responses to interest rate surprises, consistent with a demand channel of policy transmission. In addition, transmission of U.S. policy appears to be stronger to economies with fixed exchange rates. Evidence for a credit channel is weaker.