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The impact of unconventional monetary policy on the tail risks of stock markets between U.S. and Japan

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  • Wang, Yi-Chen
  • Wang, Ching-Wen
  • Huang, Chia-Hsing

Abstract

Facing the economic downturn, the central bank of U.S. and Japan adopts the unconventional monetary policy to stimulate their economy. This paper studies the quantitative easing policy effectiveness via the tail risks of stock markets in the U.S., Japan and the other 74 countries. Although the stock markets of U.S. and Japan reveals the announcement-day effects of the QE policy, this study finds an asymmetric tail risk of return distribution on the QE policy effect. The post-period right-tail and left-tail risks of the stock markets are significantly smaller and larger than that of the pre-period of the QE programs, respectively. This implies that the tail risks of stock returns have dissimilar interdependence with the QE programs. Furthermore, the geographical dependence is the major factor that determines the contagion of stock market, and the fragility of foreign stock market caused by the US QE policy is larger than that of the Japan.

Suggested Citation

  • Wang, Yi-Chen & Wang, Ching-Wen & Huang, Chia-Hsing, 2015. "The impact of unconventional monetary policy on the tail risks of stock markets between U.S. and Japan," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 41-51.
  • Handle: RePEc:eee:finana:v:41:y:2015:i:c:p:41-51
    DOI: 10.1016/j.irfa.2015.05.020
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    References listed on IDEAS

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    Cited by:

    1. Kiendrebeogo, Youssouf, 2016. "Unconventional monetary policy and capital flows," Economic Modelling, Elsevier, vol. 54(C), pages 412-424.
    2. repec:eee:finana:v:52:y:2017:i:c:p:281-291 is not listed on IDEAS

    More about this item

    Keywords

    Unconventional monetary policy; Tail risks; Interdependence;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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