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The global transmission of U.S. monetary policy

Author

Listed:
  • Riccardo Degasperi

    (Bank of Italy)

  • Seokki Simon Hong

    (Paris School of Economics)

  • Giovanni Ricco

    (CREST – Ecole Polytechnique)

Abstract

US monetary policy impacts global economic conditions, with tightenings causing recessions worldwide. We employ a state-of-the-art identification of monetary policy shocks and a comprehensive dataset covering 30 advanced and emerging economies to estimate the international spillover effects of US monetary policy. We report the existence of a novel transmission channel, mediated by commodity and oil prices, by which tightenings exert downward pressure on inflation globally. Furthermore, we find that financial channels are crucial for the transmission of the shock to real variables, as they hamper foreign central banks' control over domestic conditions by impairing the transmission of countercyclical monetary policy to the medium-long end of the yield curve.

Suggested Citation

  • Riccardo Degasperi & Seokki Simon Hong & Giovanni Ricco, 2024. "The global transmission of U.S. monetary policy," Temi di discussione (Economic working papers) 1466, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1466_24
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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2024/2024-1466/en_tema_1466.pdf
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    More about this item

    Keywords

    monetary policy; trilemma; exchange rates; monetary policy spillovers;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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