Séminaire Nancy – Urszula Szczerbowicz (Banque de France)

Détails de l'événement :

“The effects of US monetary policy and informational shocks on capital flows” with Julia Schmidt and Maéva Silvestrini

Abstract: Different monetary policies and central bank information shocks may have opposite effects on capital flows, yet there are often communicated at the same time. Confounding these shocks may lead to underestimating their impact and deliver puzzling results. Using Jarocinski (2022)’s novel identification of central bank shocks, we measure the impact of conventional monetary policy, forward guidance and asset purchases shocks as well as Fed’s information shock on flow and valuation (price and FX changes) components of capital flows. Our analysis concerns both US and foreign investors’ perspectives from advanced, emerging or tax haven countries over a period from March 1994 to June 2019. We find significant and opposite effects from US ‘pure’ monetary policies and information shocks on US bilateral flows. These effects mostly pass through changes in valuation components rather than flows, with the exception of bilateral flows towards the tax havens. Valuation effects are larger for equities than for bonds. Finally, the valuation effects from information shocks are more pronounced for negative and large shocks in a risky environment, which supports the presence of a “flight-to-safety” phenomenon associated with information shocks.