Monetary Policy and Speculative Spillovers in Financial Markets

21 Pages Posted: 12 May 2020

See all articles by Riza Demirer

Riza Demirer

Southern Illinois University Edwardsville - Department of Economics & Finance; Economic Research Forum (ERF)

David Gabauer

Johannes Kepler University; Webster University - Webster Vienna Private University

Rangan Gupta

University of Pretoria - Department of Economics

Date Written: April 16, 2020

Abstract

This paper examines the role of monetary policy (MP) as a driver of connectedness patterns in speculative activities in financial markets. Examining measures of speculation in four major markets including gold, equities, Treasury bonds and crude oil, we show that speculative activities can spill over across markets with the stock market generally serving as the main transmitter of speculative shocks. While unconventional MP is associated with greater connectedness of speculative activities in financial markets, we also find that unconventional (conventional) MP drives gold (financial assets) to serve as a net transmitter of speculative shocks to the other markets. The findings establish an important link between the monetary policy signals and trading behavior in financial markets with significant policy implications.

Keywords: Monetary Policy, Speculation, TVP-VAR, Dynamic Connectedness, Quantiles

JEL Classification: C32, E32, F42

Suggested Citation

Demirer, Riza and Gabauer, David and Gupta, Rangan, Monetary Policy and Speculative Spillovers in Financial Markets (April 16, 2020). Available at SSRN: https://ssrn.com/abstract=3578169 or http://dx.doi.org/10.2139/ssrn.3578169

Riza Demirer (Contact Author)

Southern Illinois University Edwardsville - Department of Economics & Finance ( email )

Department of Economics & Finance
Alumni Hall 3144
Edwardsville, IL 62026-1102
United States
(618) 650-2939 (Phone)
(618) 650-3047 (Fax)

HOME PAGE: http://www.siue.edu/~rdemire/

Economic Research Forum (ERF)

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Cairo, Cairo
Egypt

HOME PAGE: http://erf.org.eg/affiliates/riza-demirer-3/

David Gabauer

Johannes Kepler University ( email )

Altenbergerstraße 69
Linz, 4040
Austria

Webster University - Webster Vienna Private University ( email )

Praterstraße 23
Vienna, Vienna 1020
Austria

Rangan Gupta

University of Pretoria - Department of Economics ( email )

South Africa

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
21
Abstract Views
133
PlumX Metrics