The convenience yield channel of monetary policy and international stock prices
Document Type
Article
Publication Date
2026
Department/School
Economics
Publication Title
Finance Research Letters
Abstract
Krishnamurthy and Lustig (2019) propose a convenience yield monetary policy channel, whereby Federal Reserve decisions affect global financial variables through their effect on the convenience yield of dollar-denominated safe assets. We document that this channel contributes to the spillover of Fed policy to international stock markets. Following a surprise monetary tightening, the convenience yield differential between US Treasuries and equivalent foreign government bonds widens. A monetary policy-induced increase in the convenience yield differential thus leads to a decline in international stock indexes.
Link to Published Version
Recommended Citation
Alam, M. J., Sardar, Md. R. R., & Schaffer, M. (2026). The convenience yield channel of monetary policy and international stock prices. Finance Research Letters, 98, 109826. https://doi.org/10.1016/j.frl.2026.109826
Comments
M. Schaffer is a faculty member in EMU's Department of Economics.