This thesis seeks to identify recent monetary and financial global factors, investigates the significance of a shock to cross-border bank capital flows, critically reviews the performance of recently proposed measures of global monetary policy shocks and examines the impact of exogenous global monetary policy shocks on the global stock prices while controlling for global risk shocks. The thesis consists of three essays. The first essay "Global Liquidity Transmission and Emerging Economies Reactions" considers the importance of BIS (Bank for International Settlement) bank to bank and bank to non-bank claims examine the significance of Market Driven (MD) global liquidity factor. We find that the pattern of the MD_Factor prior to the 2007-2009 Global Financial Crisis (GFC) aligns with the fact of excessive market driven global liquidity while during the 2007-2009 GFC, the MD_Factor shows a significant decline in global liquidity. Further using a Factor Augmented Vector Auto Regression (FAVAR), we document the strong impact of a positive MD shock (high MD global liquidity shocks) on capital flows and the appreciation of the exchange rate of emerging economies compared to Choi, Kang, Kim and Lee (2017) who report a decrease in capital flows and a depreciation in the exchange rate in response to a positive MD Shock. The second essay "A review of existing measures of Global Monetary Policy shocks since the 2007-2009 Global Financial Crisis" critically reviews the performance of the estimated monetary policy measures of Wu and Xia (2016), Krippner (2015, 2020a, 2020b), Choi, Kang, Kim and Lee (2017), and Swanson (2021) by examining the consistency with the major monetary events and by conducting correlation and regression analysis. We find that the monetary policy driven global liquidity shock of Choi, Kang, Kim and Lee (2017), and the estimated shadow short rate shocks of Wu and Xia (2016) and Krippner (2020a) do not capture major US monetary events. We also find weak correlation between these estimated monetary policy shocks. The regression results indicate that neither the forward guidance shock nor the large scale asset purchase shock of Swanson (2017) capture any variation in the estimated shadow short rate shocks of Wu and Xia (2016) and Krippner (2020a). Thus we conclude that the forward guidance shock and the large scale asset purchase shock of Swanson (2021) are the most accurate measures capturing the characteristics of US unconventional monetary policy. The third essay "US Unconventional Monetary Policy Shocks and Global Stock Prices" uses panel fixed effects to examine the impact of examine the impact of US unconventional monetary policy shocks, Forward Guidance (FG) and Large Scale Asset Purchases (LSAP) on stock prices of 56 countries including 29 Advanced Economies (AEs) and 27 Emerging Markets and Developing Economies (EMDEs) from January 1998 to June 2019. We find that a tight FG shock leads to decline in stock prices of both AEs and EMDEs in the pre-zero lower bound (ZLB) period however the impact of FG shock is not significant during the ZLB period. An expansionary LSAP shock during the ZLB period significantly raises stock prices of both AEs and EMDEs with a higher economic effect on EMDEs. We also find a significant impact of an expansionary LSAP shock on global stock prices in the post-ZLB period but causing a decline in stock prices. We explain this negative impact of expansionary LSAP with the Fed response to news channel or the Fed information effect.
Date of Award | 31 Dec 2024 |
---|
Original language | English |
---|
Awarding Institution | - The University of Manchester
|
---|
Supervisor | Stuart Hyde (Supervisor) & Sungjun Cho (Supervisor) |
---|
Essays in International Finance: Global Liquidity, Global Monetary Policy Shocks, US Unconventional Monetary Policy Shocks and Global Stock Prices
Marium, S. (Author). 31 Dec 2024
Student thesis: Phd