Do fundamentals explain the international impact of U.S. interest rates? evidence at the firm level
By: John Ammer, Clara Vega, and Jon Wongswan.
Contributors: Vega, Clara.; Wongswan, Jon.
Series: International finance discussion papers -- no. 952; International finance discussion papers (Online) -- no. 952.
Publisher: Federal Reserve Board
Published: 2008
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "This paper analyzes the impact of U.S.  monetary policy announcement surprises on U.S.  and foreign firm-level equity prices.  We find that U.S.  monetary policy has important influences on foreign equity prices on average, but with considerable variation across firms.  We have found that this differing response reflects a range of factors, including the extent of a foreign firm's exposure to U.S.  demand, its dependence on external financing, the behavior of interest rates in its home country, and its sensitivity to portfolio adjustment by U.S.  investors.  The cross-firm variation in the response is correlated with the firm's CAPM beta; but it cannot fully explain this variation.  More generally, we see these results as shedding some additional light on the nature and extent of the monetary and financial linkages between the United States and the rest of the world.  In particular, since we are able to explain differences across foreign firms' responses through established theories of monetary transmission, our results are consistent with the surprisingly large average foreign response to U.S.  rates reflecting fundamentals, rather than an across-the-board behavioral over-reaction"--Federal Reserve Board web site.
Notes: Title from PDF file as viewed on 6/22/2009.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.