How does unconventional monetary policy affect the global financial markets?

Tomoo Inoue, Tatsuyoshi Okimoto

Research output: Contribution to journalArticlepeer-review


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
Number of pages24
JournalEmpirical Economics
Issue number3
Publication statusPublished - 2022 Mar
Externally publishedYes


  • Financial linkage
  • Global VAR
  • International spillover
  • Monetary policy
  • Smooth-transition model

ASJC Scopus subject areas

  • Statistics and Probability
  • Mathematics (miscellaneous)
  • Social Sciences (miscellaneous)
  • Economics and Econometrics


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