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We analyze the transmission of the 2007 to 2009 financial crisis to 415 country-industry equity portfolios. We use a factor model to predict crisis returns, defining unexplained increases in factor loadings and residual correlations as indicative of contagion. While we find evidence of contagion from the United States and the global financial sector, the effects are small. By contrast, there has been substantial contagion from domestic markets to individual domestic portfolios, with its severity inversely related to the quality of countries' economic fundamentals. This confirms the \"wake-up call\" hypothesis, with markets focusing more on country-specific characteristics during the crisis.

This article analyses the effects of the Federal Reserve's quantitative easing (QE) on global portfolio flows, differentiating across recipient region of the flows, type of flow and QE rounds. Furthermore, the analysis differentiates between the impact of QE expansionary announcements and the actual market operations. The analysis shows that QE1 resulted in (slight) rebalancing towards the US, while QE2 and QE3 resulted in rebalancing towards non-US assets. This suggests that QE increased the procyclicality of flows outside the US, in particular into emerging market equities. The results also suggest a link between US macro-financial conditions and the transmission of QE to portfolio flows.

This study assesses whether the international monetary system is already tri-polar by testing what we call China's 'dominance hypothesis', i.e. whether the renminbi already influences exchange rate and monetary policies strongly in Asia, a direct reference to the old 'German dominance hypothesis' which ascribed to the German mark a dominant role in Europe in the 1980s. Using a global factor model of exchange rates and a complementary event study, we find evidence that the renminbi has become a key driver of currency movements in Asia since the mid-2000s, especially since the global financial crisis, in line with China's dominance hypothesis.

Populism, protectionism and paralysis have become key features of almost all Western democracies today. Right-wing and left-wing populism has contributed to an increasingly confrontational discourse. It also has had a major economic impact. The rise of protectionism and economic nationalism is one result of a populism that paints foreigners, immigrants, Europe or China as enemies of national interests. At the same time, populist politics that blame all ills on others while promising a brighter future make it hard to establish an honest and constructive debate about needed reforms in times when globalisation and technological change are fundamentally transforming societies and economies everywhere.

The article assesses whether exchange rate communication - or oral intervention - has been an effective policy tool for monetary authorities to influence exchange rates. It employs an event-study methodology that identifies intervention clusters or events. For the euro-dollar and the dollar-yen exchange rates, the article finds that both oral intervention events and actual intervention events have been highly successful over the short to medium-run. The article shows that the success of intervention events is related to market conditions and to the coordination among policy makers. It also finds that the success of communication and actual interventions is largely unrelated to monetary policy, thus suggesting that interventions primarily function through a coordination channel.

This paper assesses the financial market impact of ECB unconventional monetary policy between 2007 and 2012. The paper looks at a broad range of asset prices and portfolio flows in the euro area and globally, using data at daily frequency. It finds that ECB policies boosted equity prices and lowered bond market fragmentation in the euro area. Spillovers to advanced economies and emerging markets included a positive impact on equity markets and confidence. The effects of ECB policies on bond markets outside the euro area were negligible. ECB policies also lowered credit risk among banks and sovereigns in the euro area and other G20 countries, while there is limited evidence of portfolio rebalancing across regions and assets on impact.

Over the last two decades, communication has become an increasingly important aspect of monetary policy. These real-world developments have spawned a huge new scholarly literature on central bank communication—mostly empirical, and almost all of it written in this decade. We survey this ever-growing literature. The evidence suggests that communication can be an important and powerful part of the central bank's toolkit since it has the ability to move financial markets, to enhance the predictability of monetary policy decisions, and potentially to help achieve central banks' macroeconomic objectives. However, the large variation in communication strategies across central banks suggests that a consensus has yet to emerge on what constitutes an optimal communication strategy.

The paper assesses the communication strategies of the Federal Reserve, the Bank of England, and the European Central Bank and their effectiveness. We find that the effectiveness of communication is not independent from the decision-making process. The paper shows that the Federal Reserve has been pursuing a highly individualistic communication strategy amid a collegial approach to decision making, while the Bank of England is using a collegial communication strategy and highly individualistic decision making. The European Central Bank (ECB) has chosen a collegial approach both in its communication and in its decision making. Assessing these strategies, we find that predictability of policy decisions and the responsiveness of financial markets to communication are equally good for the Federal Reserve and the ECB. This suggests that there may not be a single best approach to designing a central bank communication strategy.

This paper analyses the effects of U.S. monetary policy on stock markets. We present evidence that individual stocks react in a highly heterogeneous fashion to U.S. monetary policy shocks and relate this heterogeneity to financial constraints and Tobin's q. First, we show that there are strong industry-specific effects of U.S. monetary policy. Second, we also find that for the 500 individual stocks comprising the S&P500 the firms with low cash flows, small size, poor credit ratings, low debt to capital ratios, high price-earnings ratios, or a high Tobin's q are affected significantly more by monetary policy.

This paper analyses the integration process of European equity markets since the 1980s. Its central focus is on the role that EMU, and specifically, changes in exchange rate volatility, has played in this process of financial integration. Building on an uncovered interest rate parity condition to measure financial integration, a trivariate GARCH model with time‐varying coefficients yields three key results: first, European equity markets have become highly integrated only since 1996. Second, the Euro area market has gained considerably in importance in world financial markets and has taken over from the USA as the dominant market in Europe. Third, the integration of European equity markets is in large part explained by the drive towards EMU, and in particular the elimination of exchange rate volatility and uncertainty in the process of monetary unification. Copyright © 2002 John Wiley & Sons, Ltd.