Monetary policy expectations and financial Markets: A Quantile-on-Quantile connectedness approach

IF 3.8 3区经济学 Q1 BUSINESS, FINANCE

North American Journal of Economics and Finance Pub Date : 2025-02-12 DOI:10.1016/j.najef.2025.102389

Nader Naifar

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Abstract

This study investigates how the United States (US) monetary policy expectations impact various financial market segments using a quantile-on-quantile connectedness approach. It employs the USD 1-year interest rate swap (1YUSA) as a proxy for these expectations. It also examines the interconnectedness between these expectations and key financial markets, including stocks, bonds, exchange rates, and derivatives. The analysis reveals a complex, nonlinear relationship. The impact of monetary policy expectations varies significantly across different market conditions and quantiles. Strong connectedness is particularly evident during extreme market conditions, with heightened sensitivity during periods of economic uncertainty or anticipated policy shifts. The results demonstrate that monetary policy expectations disproportionately influence financial markets, particularly during market stress. The strongest effects appear in the lower quantiles of interest rates and the upper quantiles of market indices. These findings are crucial for policymakers and investors, providing deeper insights into the market’s response to monetary signals. They also enhance strategies for risk management and policy formulation in an increasingly volatile global financial environment.

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货币政策预期与金融市场：分位数对分位数连通性方法

本研究使用分位数对分位数的连通性方法调查了美国货币政策预期如何影响各个金融细分市场。它采用1年期美元利率互换（1YUSA）作为这些预期的代表。它还研究了这些预期与主要金融市场（包括股票、债券、汇率和衍生品）之间的相互联系。分析揭示了一种复杂的非线性关系。货币政策预期的影响在不同的市场条件和分位数上存在显著差异。在极端的市场条件下，强连通性尤其明显，在经济不确定性或预期的政策转变期间，这种连通性的敏感性更高。结果表明，货币政策预期对金融市场的影响不成比例，特别是在市场压力下。最强烈的影响出现在利率的较低分位数和市场指数的较高分位数。这些发现对政策制定者和投资者至关重要，为了解市场对货币信号的反应提供了更深入的见解。它们还加强了在日益动荡的全球金融环境中进行风险管理和制定政策的战略。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

North American Journal of Economics and Finance Multiple-

CiteScore

7.30

自引率

8.30%

发文量

168

期刊介绍： The focus of the North-American Journal of Economics and Finance is on the economics of integration of goods, services, financial markets, at both regional and global levels with the role of economic policy in that process playing an important role. Both theoretical and empirical papers are welcome. Empirical and policy-related papers that rely on data and the experiences of countries outside North America are also welcome. Papers should offer concrete lessons about the ongoing process of globalization, or policy implications about how governments, domestic or international institutions, can improve the coordination of their activities. Empirical analysis should be capable of replication. Authors of accepted papers will be encouraged to supply data and computer programs.