Global spillover effects of interest rate decisions : analysis between the United States and Eurozone
Halme, Kim (2025)
Pro gradu -tutkielma
2025
School of Business and Management, Kauppatieteet
Kaikki oikeudet pidätetään.
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe2025072979824
https://urn.fi/URN:NBN:fi-fe2025072979824
Tiivistelmä
This thesis examines the spillover effects of United States (US) monetary policy on the eurozone economy, with a specific focus on how surprise interest rate changes by the Federal Reserve influence European financial markets and businesses.
Employing a two-country vector autoregression (VAR) framework and local projection impulse response methods (LP-IRFs), the study utilizes a market-based identification strategy for US monetary policy surprises derived from federal funds futures data. The analysis spans three distinct monetary policy environments: pre-financial crisis, during the zero-lower-bound (ZLB) period, and the post-ZLB phase.
The results indicate that US interest rate surprises significantly impact eurozone financial variables, including equity indices, interest rates, exchange rates, and corporate credit spreads, though the magnitude and persistence of these effects vary across timeframes. The findings underscore the eurozone’s diminishing and increasingly unpredictable financial sensitivity to US monetary policy, highlighting the need for ongoing diligence and the integration of global monetary developments into regional macroeconomic planning and risk assessment.
Employing a two-country vector autoregression (VAR) framework and local projection impulse response methods (LP-IRFs), the study utilizes a market-based identification strategy for US monetary policy surprises derived from federal funds futures data. The analysis spans three distinct monetary policy environments: pre-financial crisis, during the zero-lower-bound (ZLB) period, and the post-ZLB phase.
The results indicate that US interest rate surprises significantly impact eurozone financial variables, including equity indices, interest rates, exchange rates, and corporate credit spreads, though the magnitude and persistence of these effects vary across timeframes. The findings underscore the eurozone’s diminishing and increasingly unpredictable financial sensitivity to US monetary policy, highlighting the need for ongoing diligence and the integration of global monetary developments into regional macroeconomic planning and risk assessment.