International Transmission of U.S. Monetary Policy Shocks: Evidence from Stock Prices


  • We thank Michael Furchtgott for his contributions to an earlier project that this work extends, Refet Gürkaynak for providing some of the data on monetary policy announcement surprises, Christian S. Miller and Nicholas Klagge for excellent research assistance, and Marcel Fratzscher and other conference and workshop participants at the Federal Reserve Board for helpful comments. The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or of any other person associated with the Federal Reserve System.


This paper analyzes intraday changes in firm-level equity prices around interest rate announcements to assess the transmission of U.S. monetary policy to the global economy. We document that foreign firms on average are roughly as sensitive to U.S. monetary policy as U.S. firms, although we also find considerable cross-sectional variation across firms. In particular, foreign stocks in cyclically sensitive industries show stronger responses to interest rate surprises, consistent with a demand channel of policy transmission. In addition, transmission of U.S. policy appears to be stronger to economies with fixed exchange rates. Evidence for a credit channel is weaker.