Financial market spillovers of U.S. monetary policy shocks
Why this work is in the frame
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Bibliographic record
Abstract
Abstract This paper investigates the cross‐border propagation of U.S. monetary policy shocks to the financial markets of five open countries—Australia, Canada, New Zealand, South Korea, and the United Kingdom—from 2000 to 2017. I estimate the structural VAR models that consist of multiple high‐frequency financial variables, in which the impacts of foreign (U.S.) and local monetary policy shocks are estimated jointly, using a novel set of external instruments. I include a wide range of domestic, U.S., and global endogenous variables to reflect the various channels of shock transmission. I draw four main findings from the empirical results. First, the foreign exchange rates respond flexibly to domestic and foreign monetary shocks, as the overshooting theory predicts. Second, despite the reactions in foreign exchange rates, U.S. monetary shocks propagate strongly to domestic financial markets in other countries, possibly reflecting the correlated term and risk premiums across countries. Third, while the results support the significant transmission of domestic monetary policies by the central banks in the countries, U.S. monetary shocks exhibit greater and more persistent impacts on domestic asset prices than the domestic shocks. Finally, a set of counterfactual experiments reveal that the international transmission of U.S. monetary policy shocks operate through several channels, including global financial sentiments, U.S. asset prices (both equity prices and bond yields), and foreign exchange rates.
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Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.001 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.000 |
| Bibliometrics | 0.000 | 0.000 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.000 |
| Open science | 0.000 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.005 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from it