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International monetary policy surprise spillovers

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  • Craine, Roger
  • Martin, Vance L.

Abstract

This is the first paper to examine international monetary surprise spillovers and to estimate the response of security prices to monetary and nonmonetary surprises. Monetary surprises have a slope effect on the domestic yield curve--short maturity yields adjust much more than longer maturity yields. These results are similar to other studies. The following results are new. US monetary surprises spill over and affect Australian yields and equity returns. Australian monetary surprises do not spill over to the US. Nonmonetary surprises are much more important than monetary policy surprises in explaining longer maturity yield changes and equity returns.

Suggested Citation

  • Craine, Roger & Martin, Vance L., 2008. "International monetary policy surprise spillovers," Journal of International Economics, Elsevier, vol. 75(1), pages 180-196, May.
  • Handle: RePEc:eee:inecon:v:75:y:2008:i:1:p:180-196
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    References listed on IDEAS

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    1. Ben S. Bernanke & Kenneth N. Kuttner, 2005. "What Explains the Stock Market's Reaction to Federal Reserve Policy?," Journal of Finance, American Finance Association, vol. 60(3), pages 1221-1257, June.
    2. Roberto Rigobon & Brian Sack, 2003. "Measuring The Reaction of Monetary Policy to the Stock Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(2), pages 639-669.
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    4. Rigobon, Roberto & Sack, Brian, 2004. "The impact of monetary policy on asset prices," Journal of Monetary Economics, Elsevier, vol. 51(8), pages 1553-1575, November.
    5. Kuttner, Kenneth N., 2001. "Monetary policy surprises and interest rates: Evidence from the Fed funds futures market," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 523-544, June.
    6. William Poole, 2005. "How predictable is Fed policy?," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 659-668.
    7. Mardi Dungey & Renee Fry & Brenda Gonzalez-Hermosillo & Vance Martin, 2005. "Empirical modelling of contagion: a review of methodologies," Quantitative Finance, Taylor & Francis Journals, vol. 5(1), pages 9-24.
    8. William Poole & Robert H & Rasche & Daniel L. Thornton, 2002. "Market anticipations of monetary policy actions," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 65-94.
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