Zhigang Yuan: The subprime crisis in 2007 heralded the era of quantitative easing (QE). Little is known, however, about the effectiveness of unconventional monetary policies (UMPs) and their mechanisms. This paper contributes to the literature by investigating the cross-country spillover effects of UMPs in the United States and Japan. As UMPs are implemented when policy interest rates are constrained near zero, changes in policy interest rates can no longer indicate the accommodativeness of monetary policies. Shadow short rates, which can be consistently used across both conventional and unconventional monetary policy regimes, are therefore constructed. By studying influences of monetary policy shocks on asset prices, this paper confirms significant spillover effects in both countries. Magnitudes and directions of the effects vary across origin countries or different periods, however.
The paper adds to our understanding of UMP effects. Nevertheless, to provide references for future policy designs and international coordination, I would like...