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The purpose of this paper is to investigate the impact of the Federal Reserve's conventional and unconventional monetary policy shocks on the US unemployment rate.

The authors employ a unified time-varying framework to an extensive data set from 1960 to 2019.

The authors find that both conventional and unconventional monetary policy influence the unemployment rate, but the effects of unconventional monetary policy vary greatly during the first, second and third rounds of quantitative easing (dubbed QE1, QE2 and QE3, respectively). It significantly influenced the unemployment rate in QE3. However, the effects are less persistent than the effects of conventional monetary policy shocks. The impact of unconventional monetary policy transmits to the real economy through conventional interest rates, exchange rates and asset price channels. The responses of unemployment rate are smaller during QE1 and QE2 due to the rise in inflation uncertainty and economic policy uncertainty.

The impact of the Fed's unconventional monetary policy shocks on the US unemployment rate during QE1, QE2 and QE3 is time-varying. It is explained by inflation uncertainty and real option channels.

This paper presents an integrated overview of the empirical literature on the impact of all forms of unconventional monetary policy on macroeconomic variables and on markets.

This survey covers the findings concerning portfolio rebalancing, signaling, liquidity, bank lending and confidence channels.

The positive effect of QE announcements on stock and bond prices seems to be unified across studies. A contagion effect from US QE to other emerging markets is identified, while currency devaluation is present in most cases for the country that its central bank adopted such policies. Moreover, impacts of non-conventional practices on GDP, inflation and unemployment are examined. The studies presenting weak instead of strong positive effects on inflation are more, and these studies, also, present weak positive effects on GDP growth.

Based on the large body of research on non-conventional action taking, this is the first survey including effects of each country that adopted quantitative easing (QE) measures and that provides results from every methodology employed in order to estimate unconventional practices' impacts.

This paper aims to constitute to the first empirical work that investigated the effects of US unconventional monetary policy shocks on Islamic equities.

The authors used the spread between sovereign (term spread) and corporate (corporate spread) yields as proxies of unconventional monetary policy in times that FED implemented different rounds of large-scale asset purchasing programs.

This paper demonstrates that monetary policy shocks have significant effects on Islamic equities. The analysis showed substantial evidence that the corporate spread innovation was reflected as a positive signal in Islamic equity markets and has a larger impact on Islamic low leverage equities than term spread.

The objective of this paper is to shed some insight into the effects of US unconventional monetary policy on low leverage financial assets. It is hypothesized that during this period, specifically from November 2008, unconventional monetary policy and zero bound interest rates have been implemented in the US economy. However, the strength of effects of this range of policies on Islamic financial products is unidentified.

This study aims to examine to what extent the Japanese financial markets are affected by the four periods of unconventional monetary policies (UMP) implemented by the Bank of Japan from 2013 to 2020.

Using the daily 10-year term spread as a proxy for monetary easing policy, this study uses four sub-sample periods from 2013 to 2020 to look into the effectiveness of UMP on the Japanese financial markets.

Our result shows that not all of the Bank of Japan's unconventional monetary policies are equally effective in influencing the Japanese financial markets. In particular, the QQE policy implemented from April 2013 to October 2014 effectively influenced the stock market, banking sector and foreign exchange market. However, the financial market impact of monetary policy is muted during the QQE expansion period. Likewise, the QQE with a negative interest rate policy influences only the banking sector. Finally, the QQE with its yield curve control policy effectively impacts the financial markets.

This research can be expanded by studying the international spillover effect of the Bank of Japan's UMP on the financial markets in Asian countries.

The findings of this study enable investors to understand the causal relationship between the Bank of Japan's UMP and the financial market indicators, thereby helping them to position their portfolio investments. From the policy perspective, the finding is useful to inform the Bank of Japan on which policy is relatively effective in affecting the financial markets. In light of the empirical finding, the Bank of Japan should continue to pursue the QQE YCCP or revert to the initial QQE policy, as the two policies are relatively more effective than the QQE expansion and QQE NIRP in affecting the Japanese financial markets.

The empirical finding highlights the importance of controlling for the impact of different QQE policies in the model. Future research may consider conducting sub-sample analysis to cater to the different QQE policy regimes. This approach provides a clearer picture and valid inferences on the financial market impact of each QQE policy.

This study provides a comprehensive analysis of the impact of Bank of Japan's QQE on the Japanese financial markets. For the market participants, the findings of this study suggest that investors should closely gauge the development of the unconventional monetary policies of the Bank of Japan because the monetary easing policy influences the decision-making process of commercial banks, pension funds, mutual funds, retail investors and other stakeholders in the financial markets. The policy twist will have future ramifications for their loan, investment and retirement fund portfolios.

The paper examines the impact of the deteriorating fiscal conditions of Eurozone countries on spillover effects on bank credit margins. It is investigated whether these effects have been reduced after European Central Bank’s (ECB) signaling of pursuing an expansionary, unconventional, monetary policy to address the debt crisis in Eurozone.

A general econometric panel model is applied to investigate spillover effects between Eurozone countries and bank credit margins. In total, three periods are examined: the period before the peak of the global financial crisis and the beginning of the Irish banking crisis, the period during the debt and bank crisis in Eurozone and the period after ECB's signaling of extremely aggressive monetary easing.

According to empirical results, before the peak of the global financial crisis there was no substantial credit risk transfer from Eurozone sovereigns to banks. During the period of debt and bank crisis in Eurozone, the deterioration of the fiscal situation of Eurozone countries had a significant impact on bank Credit Default Swap (CDS) spreads. After ECB's signaling of extremely aggressive monetary easing, it does not seem to be any significant relationship between Eurozone sovereigns and bank CDS spreads. These findings reinforce the assessment that ECB's measures were effective, achieving the key objective of normalizing economic conditions and ensuring financial stability in Eurozone.

A question is whether effects can change when the corresponding contraction will lead to a reinstatement of “normal” conditions. Would there be a reversal of risk premium trends in bond markets? Although the answer from casual observations seems to be negative, it is a valid research question to be examined. An interesting issue concerning the unconventional monetary policy measures implemented by ECB concerns the issues of moral hazard that they incorporate, something that could not be addressed. Another research perspective could be the use of the beta coefficient to measure the systematic and unsystematic risk of banking sector shares.

The results have strong implications for ECB and European banking regulation. Regulators should mainly pay more attention to the amount and concentration of sovereign debt held by banks. Eurozone financial system could be less vulnerable to the sovereign credit risk. It raised the critical question of whether a more strict regulation is needed. Regulators should not intervene if not necessary, but they must prevent the transmission of crises between markets. This will likely bring trust to the developed countries' sovereign debt and the portfolios of the financial institutions, which hold most of this debt will be considered safe as well.

The conclusions provide a safe counterweight in various respects. First, the negative effects and the need to rapidly cease or limit such policies. Second, the financial stability aimed by ECB. Such policies contain the possibility of a subsequent moral hazard related to Member State and bank behavior. However, these contingencies need to be assessed with the benefits resulting from the restoration of financial markets and the disconnection between banking and sovereign credit risk. This leads Eurozone's financial system to become less vulnerable to the sovereign credit risk and therefore more safe, helping to restore confidence in the real economy.

Contribution in terms of methodology and conclusions. It offers important conclusions regarding the limitations of yields and volatility of CDS spreads. It examines the spillover effects of the fiscal situation of Eurozone countries on banking institutions by extending the existing methodology and introducing new questions focusing on the reaction of CDS market to the ECB monetary policy, the reduction of risk premiums at sovereign and banking level and the gradual reduction of interdependence between them.

This paper aims to examine the dynamic impacts of the COVID-19 pandemic and government policy on real house price indices in five emerging economies, namely, Brazil, China, Thailand, Turkey and South Africa.

The authors use the local projection method with a panel data set of these countries spanning from January 2020 to July 2021.

The number of COVID-19 confirmed positive cases raised housing prices, whereas government containment measures reduced them. Both conventional and unconventional monetary policy implemented by central banks to cope with the COVID-19 helped increase housing prices. These effects were strengthened by the US monetary policy via globalized financial markets.

First, while previous researches typically concentrated on developed countries, the authors investigate emerging economies where proportionally more people were badly affected by the pandemic. Second, a panel data set of five emerging economies enabled the authors to examine the dynamic effects of the COVID-19 crisis on housing prices. Third, to the best of the authors’ knowledge, this is the first study evaluating the influences of easing monetary policy on housing prices in emerging economies during the pandemic.

This paper aims to revisit the theme of fiscal-monetary coordination in a general equilibrium setup that allows for unconventional monetary policy, monetary policy transmission and developing country characteristics.

This paper uses a calibrated new Keynesian dynamic stochastic general equilibrium (DSGE) model to study fiscal-monetary interaction.

Debt sits at the center of monetary-fiscal interaction. Under high-debt conditions, the inflation-output trade-off rises with an increase in the strictness with which monetary policy targets inflation, undermining the standard prescription of strict inflation targeting. At the same time, the transmission of monetary policy is also impeded, due to which unconventional monetary policy becomes more appropriate. The need for coordination among the policies gets enhanced in the presence of borrowing cost channel. While the presence of borrowing cost channel increases the need for policy coordination regardless of the debt situation, features like higher share of non-Ricardian households and weaker monetary policy transmission affect monetary-fiscal interaction to a greater extent under high-debt environment.

First, this paper uses inflation-output trade-off as a metric, to analyze fiscal-monetary interaction. Second, this paper considers the impact of developing country characteristics (such as a higher share of non-Ricardian households, impeded monetary policy transmission and supply constraints/borrowing cost channel) on fiscal-monetary interaction. Third, the DSGE model developed in this paper incorporates open market operations that could shed light on the role of unconventional monetary policy in the presence of high fiscal deficit and debt, which is particularly relevant in the current context of the COVID-19 pandemic. Fourth, the model also permits an investigation into monetary policy transmission under different debt regimes.

Over the last few years, the European Central Bank (ECB) has adopted unconventional monetary policies. These measures aim to boost economic growth and increase inflation through the bond market. The purpose of this paper is to study the impact of the ECB’s quantitative easing (QE) on the investor’s behavior in the stock market.

First, the authors theoretically identify the transmission channels of the QE shocks to the stock market. Then, the authors empirically assess the financial market’s responses to QE shocks in a data-rich environment using a factor augmented VAR (FAVAR).

The results show that the ECB’s unconventional monetary policy positively affects the stock market. A QE shock leads to an increase in stock prices and a drop in the realized volatility and the implied risk premium. The authors also suggest that the ECB’s QE is transmitted to the stock market through five main channels: the liquidity, the expectation, the portfolio reallocation, the interest rates and the risk premium channels.

The findings help to better understand the behavior of stock market assets in a data-rich economic context and guide investors and policymakers in the presence of unconventional monetary tools. For instance, decision-makers and investors should consider the short-term effect of the QE interventions and the changing behavior of the financial actors over time. In addition, high stock market returns can increase risk appetite. This can lead investors to underestimate the market risk. Decision-makers and market participants should take into consideration the impact of the large injection of money through the QE, which may raise the risk of a speculative bubble in the financial market.

To the best of the authors’ knowledge, this is the first study that incorporates a theoretical and empirical analysis to explore QE transmission to the stock market in the European context. Unlike previous studies, the authors use the shadow rate proposed by Wu and Xia (2017) to quantify the effect of the ECB’s QE in a data-rich environment. The authors also include two key risk indicators – the stock market risk premium and the realized volatility – to capture investors’ behavior in the stock market following QE shocks.

The purpose of this paper is to present theoretical and empirical support that the fear component associated with rare events has an impact on risk premium and market returns.

Extension of jump-diffusion model to extract the fear component from representative agent risk aversion, Standard VAR and impulse response function analysis, Event study analysis.

The model implicates that investor fear of tail jumps in the financial market impacts equity risk premium. The empirical findings show both positive stock and monetary policy shocks decrease investor’s fear. It can be attributed to that a bullish stock market and an increase in interest rate reflects expanding economy, and it leads to a decrease in fear. Moreover, a surprise decline in the expected short-term rate has a mixed impact on tail risk aversion. A plausible explanation is that investors believe a surprise drop in an expected short-term rate reflects a fast deteriorating economic outlook during unconventional monetary policy period.

This paper provides theoretical framework to decompose risk aversion into two separate components: one component associated with daily volatility, and the fear component associated with rare events. The study uses risk premiums decomposed from Chicago Board Options Exchange volatility index as proxies for the two components of risk aversion, and then utilizes standard value at risk and event study analysis to show the fear component plays a role in risk premium and market return.

This chapter proposes a comparative analysis of the monetary policies undertaken by the Federal Reserve Board and the European Central Bank after the 2008 subprime crisis. We point out the twin nature of the financial crises in Europe in comparison with the US crises: in addition to the role of bank funding, the euro area countries have also experienced a structural problem of balance of payment disequilibria. This explains why in the early stages of the subprime crisis, the Fed has succeeded in tackling the illiquidity problems facing the banking sector, while the ECB did not. The Fed could then focus on tackling the recession in the real sector by adopting quantitative easing policies to exert downward pressure on the long-term interest-rate. In the euro area quantitative easing policies came later, in 2013. Even the forward guidance policies have been different between the two central banks. Unlike the ECB, the Fed has gone through diverse forward guidance policies: qualitative, calendar-based, and state-contingent. The chapter proposes a new survey of the monetary policies after the subprime crisis by comparing two strategies in different contexts: the United States and the euro area.