We examine the transmission mechanisms of the Federal Reserve's announcements to equity markets worldwide. We propose a model that explores the monetary policy spillover effects through central bank coordination and production networks. We estimate the model using spatial panel econometric methods with interactive fixed effects breaking down the overall impact of U.S. monetary policy shocks into four distinct components: 1) interest rate effects, 2) direct effects on domestic demand, 3) network effects through international demand, and 4) risk premium effects. Our findings highlight the significant contributions of all effects, with the risk premium and direct effects being the most important.

zlynne@ceibs.edu