Research Discussion Paper – RDP 2019-03 Online Appendix: Explaining Monetary Spillovers: The Matrix Reloaded

Jonathan Kearns, Andreas Schrimpfand Fan Dora Xia

April 2019

This appendix provides additional information to accompany Research Discussion Paper No 2019-03. Section 1 provides a data overview. Section 2 provides some supplementary figures and tables.

1. Data Overview

Table A1: List of Recipient Economies
Advanced (27)   Emerging market (20)
Euro area Other Asia Europe Latin America Other
Austria Australia   China Poland Brazil Nigeria
Belgium Canada   India Romania Chile Pakistan
Finland Czech Republic   Indonesia Turkey Colombia Russia
France Denmark   Malaysia   Mexico South Africa
Germany Hong Kong   Philippines   Peru  
Greece Israel   Thailand   Venezuela  
Ireland Japan   Vietnam      
Italy New Zealand          
Netherlands Norway          
Portugal Singapore          
Spain South Korea          
  Sweden          
  Switzerland          
  Taiwan          
  United Kingdom          
  United States          
Table A2: Data Sources
Variable Description Source
Interest rates
1-month and 6-month OIS Overnight indexed swaps Bloomberg; Thomson Reuters Tick History
2-year and 10-year bond yields Sovereign bond yields Bloomberg; Thomson Reuters Tick History
Global controls
US 10-year yield Sovereign benchmark bond yield  
VIX S&P 500 volatility index Bloomberg
Economic conditions
Real GDP Year-ended growth BIS; OECD; IMF World Economic Outlook
CPI inflation Annual rate BIS; IMF International Financial Statistics
Bilateral trade Imports and exports of goods and services between originator and recipient economy, ratio to GDP IMF Direction of Trade Statistics
Common language Dummy equals one if originator and recipient share a common language Mayer and Zignago (2011)
Weighted distance Distance between originator and recipient Mayer and Zignago (2011)
Time difference Time difference between originator and recipient Mayer and Zignago (2011)
Financial openness
Portfolio equity Stock of recipient economy (total assets or liabilities) as a ratio to GDP Lane and Milessi-Ferretti (2017)
Portfolio debt Stock of recipient economy (total assets or liabilities) as a ratio to GDP Lane and Milessi-Ferretti (2017)
FDI (foreign direct investment) Stock of recipient economy (total assets or liabilities) as a ratio to GDP Lane and Milessi-Ferretti (2017)
Financial derivatives Stock of recipient economy (total assets or liabilities) as a ratio to GDP Lane and Milessi-Ferretti (2017)
Bilateral financial openness
Foreign currency debt Country debt denominated in USD or EUR as a ratio to GDP BIS
Portfolio equity Ratio to recipient economy GDP IMF Coordinated Portfolio Investment Survey (CPIS)
Portfolio debt Ratio to recipient economy GDP IMF CPIS
FDI Ratio to recipient economy GDP United Nations Conference on Trade and Development (UNCTAD)
Bank loans Ratio to recipient economy GDP BIS International Banking Statistics
Notes: T Mayer and S Zignago (2011), ‘Notes on CEPII's Distances Measures: The GeoDist Database’, Centre d′Études Prospectives et d′Informations Internationales, CEPII Working Paper No 2011 – 25; PR Lane and GM Milesi-Ferretti (2017), ‘International Financial Integration in the Aftermath of the Global Financial Crisis’, IMF Working Paper No WP/17/115

2. Supplementary Figures and Tables

Figure A1: ECB Monetary Policy Shocks
Figure A1: ECB Monetary Policy Shocks

Notes: The figure depicts monetary policy shocks by the European Central Bank, computed based on the repricing of various interest rates on the release of monetary policy news; the top panel shows target shocks as estimated via the change in 1-month OIS rates in a (+/−) 20-minute window around ECB monetary policy announcements; the middle panel shows path shocks as the change in 2-year German government yields orthogonalised against the change in 1-month OIS rates; the bottom panel shows premium shocks as the change in 10-year German government bond yields orthogonalised against the change in 2-year bond yields

Figure A2: BoJ Monetary Policy Shocks
Figure A2: BoJ Monetary Policy Shocks

Notes: The figure depicts monetary policy shocks by the Bank of Japan, computed based on the repricing of various interest rates on the release of monetary policy news; the top panel shows target shocks as estimated via the change in 1-month OIS rates in a (+/−) 20-minute window around BoJ monetary policy announcements; the middle panel shows path shocks as the change in 2-year Japanese government yields orthogonalised against the change in 1-month OIS rates; the bottom panel shows premium shocks as the change in 10-year Japanese government bond yields orthogonalised against the change in 2-year bond yields

Figure A3: BoE Monetary Policy Shocks
Figure A3: BoE Monetary Policy Shocks

Notes: The figure depicts monetary policy shocks by the Bank of England, computed based on the repricing of various interest rates on the release of monetary policy news; the top panel shows target shocks as estimated via the change in 1-month OIS rates in a (+/−) 20-minute window around BoE monetary policy announcements; the middle panel shows path shocks as the change in 2-year UK government yields orthogonalised against the change in 1-month OIS rates; the bottom panel shows premium shocks as the change in 10-year UK government bond yields orthogonalised against the change in 2-year bond yields

Figure A4: BoC Monetary Policy Shocks
Figure A4: BoC Monetary Policy Shocks

Notes: The figure depicts monetary policy shocks by the Bank of Canada, computed based on the repricing of various interest rates on the release of monetary policy news; the top panel shows target shocks as estimated via the change in 1-month OIS rates in a (+/−) 20-minute window around BoC monetary policy announcements; the middle panel shows path shocks as the change in 2-year Canadian government yields orthogonalised against the change in 1-month OIS rates; the bottom panel shows premium shocks as the change in 10-year Canadian government bond yields orthogonalised against the change in 2-year bond yields

Figure A5: RBA Monetary Policy Shocks
Figure A5: RBA Monetary Policy Shocks

Notes: The figure depicts monetary policy shocks by the Reserve Bank of Australia, computed based on the repricing of various interest rates on the release of monetary policy news; the top panel shows target shocks as estimated via the change in 1-month OIS rates in a (+/−) 20-minute window around RBA monetary policy announcements; the middle panel shows path shocks as the change in 2-year Australian government yields orthogonalised against the change in 1-month OIS rates; the bottom panel shows premium shocks as the change in 10-year Australian government bond yields orthogonalised against the change in 2-year bond yields

Figure A6: SNB Monetary Policy Shocks
Figure A6: SNB Monetary Policy Shocks

Notes: The figure depicts monetary policy shocks by the Swiss National Bank, computed based on the repricing of various interest rates on the release of monetary policy news; the top panel shows target shocks as estimated via the change in 1-month OIS rates in a (+/−) 20-minute window around SNB monetary policy announcements; the middle panel shows path shocks as the change in 2-year Swiss government yields orthogonalised against the change in 1-month OIS rates; the bottom panel shows premium shocks as the change in 10-year Swiss government bond yields orthogonalised against the change in 2-year bond yields

Table A3: Spillovers and Bilateral Financial Openness
    Target Path Premia R2 (%)
Foreign currency debt ECB 0.06 0.05 0.13 2.6
(1.50) (1.36) (2.28)
ECB (excl EA) 0.00 0.12 0.13 3.6
(0.04) (3.57) (2.39)
Fed 0.09 0.05 0.00 5.7
(2.00) (1.97) (0.15)
Portfolio debt from originator economy ECB −0.10 0.09 0.08 2.4
(−1.50) (1.81) (0.98)
ECB (excl EA) 0.08 0.13 0.17 3.5
(1.56) (3.18) (3.23)
Fed 0.04 0.02 0.10 5.0
(0.75) (0.56) (2.68)
Portfolio equity from originator economy ECB 0.00 0.16 0.08 2.4
(0.06) (3.77) (1.86)
ECB (excl EA) 0.02 0.06 0.05 3.1
(0.62) (2.23) (1.18)
Fed 0.03 0.00 0.12 5.0
(0.43) (−0.01) (2.51)
Loan from originator economy ECB −0.09 0.09 −0.02 2.3
(−1.94) (2.34) (−0.22)
ECB (excl EA) −0.03 0.09 0.10 3.2
(−0.85) (2.89) (1.59)
Fed 0.00 −0.02 0.02 4.8
(0.10) (−0.77) (0.67)
FDI from originator economy ECB −0.02 0.06 0.03 3.5
(−0.61) (1.95) (0.63)
ECB (excl EA) −0.08 0.01 −0.05 9.3
(−2.51) (0.44) (−1.05)
Fed 0.02 0.00 0.02 9.1
(0.47) (0.07) (0.89)
Portfolio debt to originator economy ECB 0.07 0.14 0.16 2.7
(1.28) (3.40) (2.35)
ECB (excl EA) 0.11 0.08 0.15 3.9
(2.30) (1.98) (2.33)
Fed 0.02 −0.04 0.01 5.1
(0.41) (−1.18) (0.21)
Portfolio equity to originator economy ECB 0.09 0.14 0.15 3.5
(1.90) (3.43) (2.61)
ECB (excl EA) 0.08 0.09 0.12 6.8
(2.24) (2.62) (2.04)
Fed 0.01 −0.02 0.10 4.9
(0.09) (−0.65) (2.19)
Loan to originator economy ECB 0.02 0.09 0.16 3.7
(0.33) (2.50) (2.05)
ECB (excl EA) −0.03 0.08 0.14 3.3
(−0.93) (2.51) (3.03)
Fed −0.01 −0.03 −0.01 8.1
(−0.36) (−1.21) (−0.21)
FDI to originator economy ECB 0.04 0.11 0.08 2.5
(1.20) (3.74) (1.73)
ECB (excl EA) 0.07 0.06 0.05 3.2
(2.51) (2.26) (1.25)
Fed −0.04 −0.04 0.01 5.5
(−1.12) (−2.06) (0.53)
Notes: The table reports the results of panel regressions as given by Equation (2) with various recipient-specific conditional variable Xi,t − 1 measuring bilateral financial openness; the dependent variable is the daily change in 10-year bond yields in our set of 47 recipient economies; as regressors, besides the monetary shocks for the ECB and the Fed, specifications also include the daily change in the US Treasury yield and the VIX as global controls; the reported coefficients correspond to γ ^ j in Equation (2); t-stat from panel-corrected standard errors (PCSE) are given in parentheses; cells coloured red (blue) indicate statistically significant positive (negative) coefficients at a 10 per cent confidence level; financial flows (per cent of GDP) are measured in standard deviations from the mean
Table A4: Spillovers and Financial Openness
    Target Path Premium R2 (%)
Chinn-Ito index ECB −0.09 0.10 0.08 2.7
(−2.01) (2.64) (1.25)
Fed −0.04 −0.04 0.07 5.7
(−0.54) (−1.09) (1.55)
Debt assets ECB −0.02 0.08 0.14 2.5
(−0.47) (2.67) (2.77)
Fed 0.02 −0.02 0.02 5.5
(0.34) (−0.80) (0.72)
Portfolio assets ECB 0.02 0.09 0.18 2.6
(0.44) (2.28) (3.42)
Fed 0.04 0.00 0.10 5.6
(0.71) (−0.14) (2.52)
FDI assets ECB 0.00 0.10 0.14 2.6
(−0.10) (3.10) (3.07)
Fed 0.03 0.01 0.06 5.5
(0.55) (0.26) (1.94)
Financial derivatives ECB 0.00 0.10 0.17 2.6
(−0.02) (2.84) (3.47)
Fed 0.00 0.05 0.01 5.5
(−0.06) (1.09) (0.38)
Debt liabilities ECB −0.06 0.10 0.14 2.6
(−1.33) (2.64) (2.08)
Fed 0.01 −0.02 0.03 5.5
(0.18) (−0.64) (1.04)
Portfolio liabilities ECB 0.00 0.07 0.10 2.5
(−0.06) (1.86) (2.31)
Fed 0.04 −0.02 0.06 5.5
(0.62) (−0.72) (1.75)
FDI liabilities ECB −0.01 0.08 0.13 2.5
(−0.17) (2.62) (3.06)
Fed 0.03 0.02 0.05 5.5
(0.77) (0.64) (2.06)
Financial derivative liabilities ECB 0.00 0.10 0.16 2.6
(−0.11) (2.96) (3.42)
Fed −0.01 0.05 0.01 5.5
(−0.10) (1.10) (0.31)

Notes: The table reports the results of panel regressions as given by Equation (2) with various recipient-specific conditional variable Xi,t − 1 measuring bilateral financial openness; the dependent variable is the daily change in 10-year bond yields in our set of 47 recipient economies; as regressors, besides the monetary shocks for the ECB and the Fed, specifications also include the daily change in the US Treasury yield and the VIX as global controls; the reported coefficients correspond to γ ^ j in Equation (2); t-stat from PCSE are given in parentheses; cells coloured red (blue) indicate statistically significant positive (negative) coefficients at a 10 per cent confidence level; financial stocks (per cent of GDP) are measured in standard deviations from the mean