Bank for International Settlement
Institutional Affiliation: Reserve Bank of New Zealand
Information about this author at RePEc
NBER Working Papers and Publications
|July 2019||On the Global Impact of Risk-off Shocks and Policy-put Frameworks|
with Ricardo J. Caballero: w26031
Global risk-off shocks can be highly destabilizing for financial markets and, absent an adequate policy response, may trigger severe recessions. Policy responses were more complex for developed economies with very low interest rates after the Global Financial Crisis (GFC). We document, however, that the unconventional policies adopted by the main central banks were effective in containing asset price declines. These policies impacted long rates and inspired confidence in a policy-put framework that reduced the persistence of risk-off shocks. We also show that domestic macroeconomic and financial conditions play a key role in benefiting from the spillovers of these policies during risk-off episodes. Countries like Japan, which already had very low long rates, benefited less. However, Japan ...