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Working Paper

An Empirical Analysis of the Relationship between US Monetary Policy and International Asset Prices

Authors

  • Herwartz
  • H.
  • Morales-Arias
  • L.

Publication Date

JEL Classification

G12 G15 E44

Key Words

bootstrap inference

identification through heteroskedasticity

International asset pricing

monetary policy

recursive Mean Group estimation

This article investigates the empirical relationship between monetary policy in the United States (US) and international equity, bond and real estate security markets for the sample period 01/1994 to 12/2007. The empirical results suggest that equity markets close to the US have a statistically significant response to US monetary policy shocks. The estimated impact of US monetary policy is heterogeneous across countries but statistically significant at the aggregate level in equity and bond markets. The aggregate impact (in absolute terms) and the ‘goodness of fit’ of US monetary policy on international equity and real estate security markets seems to be increasing over time.

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Research Center

  • Macroeconomics

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