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U.S. Monetary Shocks and Global Stock Prices


Luc Laeven


International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

Hui Tong


International Monetary Fund (IMF)
November 2010

CEPR Discussion Paper No. DP8090

Abstract:     
This paper studies how U.S. monetary policy affects global stock prices. We find that global stock prices respond strongly to changes in U.S. interest rate policy, with stock prices increasing (decreasing) following unexpected monetary loosening (tightening). This impact is more pronounced for sectors that depend on external financing, and for countries that are more integrated with the global financial market. These findings suggest that financial frictions play an important role in the transmission of monetary policy, and that U.S. monetary policy influences global capital allocation.

Number of Pages in PDF File: 39

Keywords: asset allocation, asset prices, financial constraints, monetary policy, monetary transmission

JEL Classification: E44, F36, G14, G32

working papers series


Date posted: November 29, 2010  

Suggested Citation

Laeven, Luc A. and Tong, Hui, U.S. Monetary Shocks and Global Stock Prices (November 2010). CEPR Discussion Paper No. DP8090. Available at SSRN: http://ssrn.com/abstract=1714862

Contact Information

Luc A. Laeven (Contact Author)
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
202-6239020 (Phone)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Hui Tong
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
Feedback to SSRN (Beta)


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