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Cross-financial-market correlations and quantitative easing

Author

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  • Kryzanowski, Lawrence
  • Zhang, Jie
  • Zhong, Rui

Abstract

We examine the correlations between bond markets, stock markets and currency forwards during the quantitative easing (QE) programs launched by the U.S. Federal Reserve. Using DCC-GARCH models, we document a spillover impact of QE on the international financial markets and find that these correlations differ by QE period across developed and emerging countries. Our findings provide new insights into the impact of unconventional monetary policy regimes on the relationships between various international financial asset markets.

Suggested Citation

  • Kryzanowski, Lawrence & Zhang, Jie & Zhong, Rui, 2017. "Cross-financial-market correlations and quantitative easing," Finance Research Letters, Elsevier, vol. 20(C), pages 13-21.
    • Handle: RePEc:eee:finlet:v:20:y:2017:i:c:p:13-21
    DOI: 10.1016/j.frl.2016.06.011
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    References listed on IDEAS

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    5. Shahzad, Syed Jawad Hussain & Arreola-Hernandez, Jose & Bekiros, Stelios & Rehman, Mobeen Ur, 2018. "Risk transmitters and receivers in global currency markets," Finance Research Letters, Elsevier, vol. 25(C), pages 1-9.
    6. Shahzad, Syed Jawad Hussain & Hoang, Thi Hong Van & Arreola-Hernandez, Jose, 2019. "Risk spillovers between large banks and the financial sector: Asymmetric evidence from Europe," Finance Research Letters, Elsevier, vol. 28(C), pages 153-159.
    7. Νikolaos A. Kyriazis, 2021. "Investigating the nexus between European major and sectoral stock indices, gold and oil during the COVID-19 pandemic," SN Business & Economics, Springer, vol. 1(4), pages 1-12, April.
    8. Kenourgios, Dimitris & Drakonaki, Emmanouela & Dimitriou, Dimitrios, 2019. "ECB’s unconventional monetary policy and cross-financial-market correlation dynamics," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    9. Yip, Pick Schen & Brooks, Robert & Do, Hung Xuan & Vo, Xuan Vinh, 2022. "What drives cross-market correlations during the United States Q.E.?," International Review of Financial Analysis, Elsevier, vol. 83(C).
    10. Chen, Hsuan-Chi & Yeh, Chia-Wei, 2021. "Global financial crisis and COVID-19: Industrial reactions," Finance Research Letters, Elsevier, vol. 42(C).
    11. Chadwick, Meltem Gulenay, 2019. "Dependence of the “Fragile Five” and “Troubled Ten” emerging market financial systems on US monetary policy and monetary policy uncertainty," Research in International Business and Finance, Elsevier, vol. 49(C), pages 251-268.
    12. Mészáros Mercédesz & Kiss Gábor Dávid, 2020. "Spillover effects of unconventional monetary policy on capital markets in the shadow of the Eurozone: A sample of non-Eurozone countries," Review of Economic Perspectives, Sciendo, vol. 20(2), pages 171-195, June.

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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