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Global effects of U.S. monetary policy: is unconventional policy different?

Author

Listed:
  • Berge, Travis J.

    (Federal Reserve Bank of Kansas City)

  • Cao, Guangye

    (Federal Reserve Bank of Kansas City)

Abstract

U.S. monetary policy can affect asset prices both in the United States and outside of the country as investors arbitrage away price differentials between assets with similar risk/reward characteristics. Since late 2008, however, the conventional tool for monetary policy in the United States—the federal funds rate—has been near zero. As a result, the Federal Reserve has turned to unconventional monetary policies to provide additional accommodation. These unconventional policies may have altered the response of asset prices to Fed policy. Berge and Cao show that changes in U.S. monetary policy are associated with movements in a variety of asset prices, both in the United States and abroad. Evidence of a change in the behavior of asset prices at the zero lower bound is mixed. The responses of asset prices within the United States to monetary policy do not appear to be different at the zero lower bound. However, some international asset prices do appear to react differently to policy announcements after 2007.

Suggested Citation

  • Berge, Travis J. & Cao, Guangye, 2014. "Global effects of U.S. monetary policy: is unconventional policy different?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 5-31.
  • Handle: RePEc:fip:fedker:00010
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    References listed on IDEAS

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    Cited by:

    1. Smith, Andrew Lee & Becker, Thealexa, 2015. "Has forward guidance been effective?," Macro Bulletin, Federal Reserve Bank of Kansas City, pages 1-3.
    2. McQuade, Peter & Falagiarda, Matteo & Tirpák, Marcel, 2015. "Spillovers from the ECB's non-standard monetary policies on non-euro area EU countries: evidence from an event-study analysis," Working Paper Series 1869, European Central Bank.
    3. Bernhard, Severin & Ebner, Till, 2017. "Cross-border spillover effects of unconventional monetary policies on Swiss asset prices," Journal of International Money and Finance, Elsevier, vol. 75(C), pages 109-127.
    4. Annette Meinusch, 2017. "When the Fed sneezes - Spillovers from U.S. Monetary Policy to Emerging Markets," MAGKS Papers on Economics 201730, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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