How Does Unconventional Monetary Policy Affect the Global Financial Markets?: Evaluating Policy Effects by Global VAR Models

         
Author Name INOUE Tomoo (Seikei University) / OKIMOTO Tatsuyoshi (Visiting Fellow, RIETI)
Creation Date/NO. April 2019 19-E-031
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Abstract

This paper examines the effects of unconventional monetary policies (UMPs) by the Bank of Japan (BOJ) and the Federal Reserve (Fed) on the financial markets, taking international spillovers and a possible regime change into account. To this end, we apply the smooth-transition global VAR model to a set of major financial variables for 10 countries and one Euro zone. Our results suggest that the BOJ and the Fed's expansionary UMPs have had significant positive effects on domestic financial markets, particularly in more recent years. Our results also indicate that the BOJ's UMPs have rather limited effects on international financial markets and that the effect of the Fed's UMPs is approximately ten times larger.