Global Bonding: Do U.S. Bond and Equity Spillovers Dominate Global Financial Markets?

27 Pages Posted: 30 Mar 2013

See all articles by Tamim Bayoumi

Tamim Bayoumi

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

Trung Thanh Bui

Wells Fargo Bank

Date Written: December 2012


This paper uses a novel variant of identification through hetroscedacity to estimate spillovers across U.S., Euro area, Japanese, and UK government bond and equity markets in a vector autoregression. The results suggest that U.S. financial shocks reverberate around the world much more strongly than shocks from other regions, including the Euro area, while inward spillovers to the U.S. from elsewhere are minimal. There is also evidence of two-way spillovers between the UK and Euro area financial markets and spillovers from Europe to Japan. The results also suggest that the uncertainty about the direction of causality of contemporaneous correlations — an issue that other techniques cannot tackle — is the dominant source of uncertainty in the estimated impulse response functions.

Keywords: Spillovers, United States, Europe, Japan, United Kingdom, International capital markets, Bond markets, External shocks, Identification, international financial linkages, bond, spillovers, equity markets, bond yields, financial markets, bond markets, bonds, equity market, bond market, bond yield, government bond, asset markets, financial market, international bond, international financial markets, financial volatility, stock market, indexed bond, money markets, stock market indices, term bonds, long-term bonds, sovereign bond, bond yield volatility, government bond yields, government bond markets, international bond market, international capital, government bond market, financial system

JEL Classification: C13, C32, F30, G15

Suggested Citation

Bayoumi, Tamim and Bui, Trung Thanh, Global Bonding: Do U.S. Bond and Equity Spillovers Dominate Global Financial Markets? (December 2012). IMF Working Paper No. 12/298. Available at SSRN:

Tamim Bayoumi (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6333 (Phone)
202-623-4795 (Fax)

Centre for Economic Policy Research (CEPR)

United Kingdom

Trung Thanh Bui

Wells Fargo Bank ( email )

1750 H St NW
6th Fl
Washington, DC 20006
United States

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