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The global spillovers of unconventional monetary policies on tail risks

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  • Alonso, Irma
  • Serrano, Pedro
  • Vaello-Sebastià, Antoni

Abstract

This article analyzes the risk spillovers of UMPs of four major central banks on the expectations of a market crash in foreign equity markets. The empirical findings show that forward guidance measures exhibit a significant cross-border impact on tail risks. Other expansionary UMPs are innocuous on inducing risk spillovers to other economies. A classification of reversal UMPs into contractionary and tapering provides opposite conclusions: contractionary UMPs shocks exhibit a strong and negative cross-border impact on the tail risks of other economic areas, contrary to tapering announcements. Both the Fed and ECB unconventional policies induce significant risk spillovers with similar magnitudes.

Suggested Citation

  • Alonso, Irma & Serrano, Pedro & Vaello-Sebastià, Antoni, 2024. "The global spillovers of unconventional monetary policies on tail risks," Finance Research Letters, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323011923
    DOI: 10.1016/j.frl.2023.104820
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    References listed on IDEAS

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    1. Irma Alonso & Pedro Serrano & Antoni Vaello-Sebastià, 2021. "The impact of heterogeneous unconventional monetary policies on the expectations of market crashes," Working Papers 2127, Banco de España.
    2. Maurice Obstfeld & Kenneth Rogoff, 2002. "Global Implications of Self-Oriented National Monetary Rules," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 503-535.
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    4. Neuenkirch, Matthias, 2013. "Monetary policy transmission in vector autoregressions: A new approach using central bank communication," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4278-4285.
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    More about this item

    Keywords

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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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