Essays in empirical finance and monetary policy

Frederiek van Holle

Research output: ThesisDoctoral ThesisScientific

458 Downloads (Pure)

Abstract

This dissertation consists of three essays. In the first paper, “Stock-Bond Correlations, Macroeconomic Regimes and Monetary Policy”, we link the evolution of stock-bond correlations for an international sample to both local and global regimes in inflation, the output gap and monetary policy. We find that negative stock-bond correlations only occur during regimes of low to medium inflation, combined with an accommodating monetary policy. This observation is highly relevant in the current environment of potential policy normalization by central banks. Normalizing policy could push stock-bond correlations back into positive territory resulting in a higher volatility of balanced investment portfolios.
The second paper, “The Dynamic Risk Profile of Currency Carry Strategies”, contributes to a better understanding of the time-varying risk exposure of the currency carry strategy applied on the G10 currencies. Risk factor migration over time is captured using Bayesian model averaging techniques.
The third paper, “Monetary Policy Transmission and the Impact on Financial Assets, the Real Economy and Inflation”, studies the different dimensions of conventional and unconventional monetary policy. The recent unfolding of unconventional policy measures like QE and forward guidance and the presence of the so-called zero lower-bound on nominal interest rates further complicate the transmission. I show that asymmetrical policy transmission challenges the current focus on policy normalization after a decade of ultra-loose monetary policy.
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
  • Tilburg University
Supervisors/Advisors
  • Driessen, Joost, Promotor
  • Baele, Lieven, Co-promotor
Award date19 Dec 2017
Place of PublicationTilburg
Publisher
Print ISBNs978 90 5668 542 3
Publication statusPublished - 2017

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Stock-bond correlation
Finance
Monetary policy
Currency
Inflation
Normalization
Monetary policy transmission
Nominal interest rate
Zero lower bound
Macroeconomics
Guidance
Central bank
Risk factors
Unconventional monetary policy
Time-varying risk
Investment portfolio
Bayesian model averaging
Policy measures
Output gap
Risk exposure

Cite this

van Holle, F. (2017). Essays in empirical finance and monetary policy. Tilburg: CentER, Center for Economic Research.
van Holle, Frederiek. / Essays in empirical finance and monetary policy. Tilburg : CentER, Center for Economic Research, 2017. 370 p.
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van Holle, F 2017, 'Essays in empirical finance and monetary policy', Doctor of Philosophy, Tilburg University, Tilburg.

Essays in empirical finance and monetary policy. / van Holle, Frederiek.

Tilburg : CentER, Center for Economic Research, 2017. 370 p.

Research output: ThesisDoctoral ThesisScientific

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T1 - Essays in empirical finance and monetary policy

AU - van Holle, Frederiek

PY - 2017

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AB - This dissertation consists of three essays. In the first paper, “Stock-Bond Correlations, Macroeconomic Regimes and Monetary Policy”, we link the evolution of stock-bond correlations for an international sample to both local and global regimes in inflation, the output gap and monetary policy. We find that negative stock-bond correlations only occur during regimes of low to medium inflation, combined with an accommodating monetary policy. This observation is highly relevant in the current environment of potential policy normalization by central banks. Normalizing policy could push stock-bond correlations back into positive territory resulting in a higher volatility of balanced investment portfolios.The second paper, “The Dynamic Risk Profile of Currency Carry Strategies”, contributes to a better understanding of the time-varying risk exposure of the currency carry strategy applied on the G10 currencies. Risk factor migration over time is captured using Bayesian model averaging techniques. The third paper, “Monetary Policy Transmission and the Impact on Financial Assets, the Real Economy and Inflation”, studies the different dimensions of conventional and unconventional monetary policy. The recent unfolding of unconventional policy measures like QE and forward guidance and the presence of the so-called zero lower-bound on nominal interest rates further complicate the transmission. I show that asymmetrical policy transmission challenges the current focus on policy normalization after a decade of ultra-loose monetary policy.

M3 - Doctoral Thesis

SN - 978 90 5668 542 3

T3 - CentER Dissertation Series

PB - CentER, Center for Economic Research

CY - Tilburg

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van Holle F. Essays in empirical finance and monetary policy. Tilburg: CentER, Center for Economic Research, 2017. 370 p. (CentER Dissertation Series).