U.S. Monetary Policy Surprises and International Securitized Real Estate Markets

Pisun Xu and Jian Yang

Online First™, 10 November 2009

Abstract

This paper examines the impact of U.S. monetary policy surprises on securitized real estate markets in 18 countries. The policy surprises are measured by both the surprise changes to the target federal funds rate (the target factor) and surprises in the future direction of the Federal Reserve monetary policy (the path factor). The results show that most international securitized real estate markets have significantly positive responses to surprise decrease in current or future expected federal funds rates, though such responses vary greatly across countries. Also, while the U.S. securitized real estate market reacts mainly to the target factor, foreign securitized real estate markets react to the path factor. Furthermore, we find that the cross-country variation in the response to the target factor is correlated with the country’s exchange rate regime and its degree of real economic and particularly financial integration, while the cross-country variation in the response to the path factor is mainly related to the country’s degree of financial integration.Keywords  Monetary policy – FOMC statements – Asymmetry – Securitized real estate markets – Two-factor empirical specification

JEL Classifications  G14 – E44 – E52

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