Marcel Aloy

A Comparison of the Fed’s and ECB’s Strategies during the Subprime Crisis

This chapter proposes a comparative analysis of the monetary policies undertaken by the Federal Reserve Board and the European Central Bank after the 2008 subprime crisis. We point out the twin nature of the financial crises in Europe in comparison with the US crises: in addition to the role of bank funding, the euro area countries have also experienced a structural problem of balance of payment disequilibria. This explains why in the early stages of the subprime crisis, the Fed has succeeded in tackling the illiquidity problems facing the banking sector, while the ECB did not. The Fed could then focus on tackling the recession in the real sector by adopting quantitative easing policies to exert downward pressure on the long-term interest-rate. In the euro area quantitative easing policies came later, in 2013. Even the forward guidance policies have been different between the two central banks. Unlike the ECB, the Fed has gone through diverse forward guidance policies: qualitative, calendar-based, and state-contingent. The chapter proposes a new survey of the monetary policies after the subprime crisis by comparing two strategies in different contexts: the United States and the euro area.

Long-run relationships between international stock prices: further evidence from fractional cointegration tests

The recent empirical literature supports the view that most of the international stock prices are not pairwise cointegrated. However, by using fractional cointegration techniques, this article shows that France, Germany, Hong Kong and Japans stock prices indices are pairwise fractionally cointegrated with US stock prices. Equilibrium errors are mean reverting with half-life lying between 2 and 12 days. It is worthwhile noting that emerging markets like Brazil and Argentina are not pairwise cointegrated with the US stock market. These new results have important implications for asset pricing and international portfolio strategy.

Shift-Volatility Transmission in East Asian Equity Markets: New Indicators

This paper attempts to provide evidence of “shift-volatility” transmission in the East Asian equity markets. By “shift-volatility”, we mean the volatility shifts from a low level to a high level corresponding respectively to tranquil and crisis periods. We examine the interdependence of equity volatilities between Hong-Kong, Indonesia, Japan, Malaysia, the Philippines, Singapore, Thailand and the United States. Our main issue is whether shift-volatility needs to be considered as a regional phenomenon, or from a more global perspective. We propose several indicators that are be useful to guide the investors in their arbitrage behavior in the different regimes: the duration of each state, the sensitivity of the volatility in a market following a change in the volatility in another market. Finally, we are able to identify which market can be considered as leading markets in terms of volatility.

Cycles de change et choix d'investissement en incertitude

A partir du concept de «profitabilite», qui permet danalyser les determinants reels et monetaires du cours de change, larticle se propose detudier les choix dinvestissement par rapport aux decalagesqui apparaissent entre les cycles de change et les cycles dactivite. La methode utilisee repose sur les travaux statistiques de Engel et Hamilton (1991) et sur une modelisation de la formation danticipations, dans un contexte Bayesien, dans le prolongement des travaux de Bernanke (1983). Les resultats des simulations conduisent dune part, a mettre en evidence une valeur doption elevee des investisseurs dans le secteur reel, relativement aux placements monetaires et financiers; dautre part, a faire apparaitre des ecarts de comportement selon les pays recepteurs des flux dinvestissements internationaux.