Working Paper

An Empirical Analysis of the Relationship between US Monetary Policy and International Asset Prices


  • Herwartz
  • H.
  • Morales-Arias
  • L.
Publication Date

This article investigates the empirical relationship between monetary policy in the United States (US) and international equity, bond and real estate security markets for the sample period 01/1994 to 12/2007. The empirical results suggest that equity markets close to the US have a statistically significant response to US monetary policy shocks. The estimated impact of US monetary policy is heterogeneous across countries but statistically significant at the aggregate level in equity and bond markets. The aggregate impact (in absolute terms) and the ‘goodness of fit’ of US monetary policy on international equity and real estate security markets seems to be increasing over time.


JEL Classification
G12, G15, E44

Key Words

  • bootstrap inference
  • identification through heteroskedasticity
  • International asset pricing
  • monetary policy
  • recursive Mean Group estimation