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LUND UNIVERSITY LIBRARIES

Transmission of Monetary Policy Shocks in a Small Open Economy: A Sector-Level PCA-VAR Approach

Åkesson, Nelly LU and Karlberg, Truls LU (2025) NEKP01 20251
Department of Economics
Abstract
This thesis investigates the effects of monetary policy shocks, both domestically from the Swedish Riksbank and internationally from the European Central Bank, on eight macro-sensitive Swedish equity indexes over the time period 2004-2024. Employing high-frequency yield changes around policy announcements, we extract level, slope and curvature factors via principal component analysis and use these as external instruments in a Proxy-VAR framework. Our findings reveal heterogenous effects over time. Prior to 2013, the indexes responds negatively to both Riksbank and ECB shocks. In contrast, post-2012 Riksbank shocks induce positive effects across indexes questioning traditional views of transmission channels. Furthermore, we find some... (More)
This thesis investigates the effects of monetary policy shocks, both domestically from the Swedish Riksbank and internationally from the European Central Bank, on eight macro-sensitive Swedish equity indexes over the time period 2004-2024. Employing high-frequency yield changes around policy announcements, we extract level, slope and curvature factors via principal component analysis and use these as external instruments in a Proxy-VAR framework. Our findings reveal heterogenous effects over time. Prior to 2013, the indexes responds negatively to both Riksbank and ECB shocks. In contrast, post-2012 Riksbank shocks induce positive effects across indexes questioning traditional views of transmission channels. Furthermore, we find some evidence of the ECB monetary policy shocks affecting the stock in- dexes more than the Riksbank shocks in the post-2012 sample. (Less)
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author
Åkesson, Nelly LU and Karlberg, Truls LU
supervisor
organization
course
NEKP01 20251
year
type
H2 - Master's Degree (Two Years)
subject
keywords
yield curve, monetary policy shocks, principal components, transmission mechanisms
language
English
id
9198999
date added to LUP
2025-09-12 11:18:40
date last changed
2025-09-12 11:18:40
@misc{9198999,
  abstract     = {{This thesis investigates the effects of monetary policy shocks, both domestically from the Swedish Riksbank and internationally from the European Central Bank, on eight macro-sensitive Swedish equity indexes over the time period 2004-2024. Employing high-frequency yield changes around policy announcements, we extract level, slope and curvature factors via principal component analysis and use these as external instruments in a Proxy-VAR framework. Our findings reveal heterogenous effects over time. Prior to 2013, the indexes responds negatively to both Riksbank and ECB shocks. In contrast, post-2012 Riksbank shocks induce positive effects across indexes questioning traditional views of transmission channels. Furthermore, we find some evidence of the ECB monetary policy shocks affecting the stock in- dexes more than the Riksbank shocks in the post-2012 sample.}},
  author       = {{Åkesson, Nelly and Karlberg, Truls}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Transmission of Monetary Policy Shocks in a Small Open Economy: A Sector-Level PCA-VAR Approach}},
  year         = {{2025}},
}