How does unconventional monetary policy affect the global financial markets?

Tomoo Inoue, Tatsuyoshi Okimoto

    Research output: Contribution to journalArticle


    This paper examines the spillover effects of unconventional monetary policies (UMPs) by the Bank of Japan (BOJ) and the Federal Reserve (Fed) on the domestic and global financial markets, taking a possible regime change into account. Applying a smooth-transition global VAR model to ten countries and the Euro zone for the sample period between 2002–2015, we find that the BOJ’s expansionary UMPs have significantly increased the equity prices and depreciated the exchange rates, regardless of the regimes. Also, our results indicate that the BOJ’s UMPs have become more effective for the government and corporate bond prices in more recent years. In addition, we find that the Fed’s expansionary UMPs have had significant positive effects on their domestic financial markets throughout the sample period. Finally, our results suggest that the BOJ’s UMPs have rather limited effects on global financial markets and that the effects of the Fed’s UMPs are considerably larger.
    Original languageEnglish
    Pages (from-to)1013–1036
    JournalEmpirical Economics
    Publication statusPublished - 2022


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