The immediate global impact of US monetary policy

Working paper

We measure international monetary policy spillovers using US-traded country ETFs, which provide real-time price discovery for foreign equity markets during Federal Reserve announcements. A geographic discontinuity validates our approach: ETF returns predict overnight index gaps only for markets closed during the announcement, not for markets trading simultaneously. This research find that a typical contractionary surprise generates immediate and universally negative spillovers and destroys approximately $280 billion in foreign equity value within thirty minutes. This transmission appears in every country examined, regardless of exchange rate regime, development level, or capital account openness. The unanimity and speed of these effects provide high-frequency evidence consistent with a global financial cycle theory of Rey (2015) driven by US monetary policy.

Authors: Kansoy, F

• Publication status: Published
• Publisher: University of Oxford
• Series: Department of Economics Discussion Paper Series
• Place of publication: Oxford
• Publication date: 2025-12-03
• Paper number: 1095
• Language: English
• Keywords: exchange-traded funds (ETFs); central bank information shocks; high-frequency identification; global financial cycle; international spillovers