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The global transmission of U.S. monetary policy

Author

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  • Riccardo Degasperi
  • Seokki Simon Hong
  • Giovanni Ricco

    (University of Warwick [Coventry])

Abstract

We quantify global US monetary policy spillovers by employing a high-frequency identification and big data techniques, in conjunction with a large harmonised dataset covering 30 economies. We report three novel stylised facts. First, a US monetary policy tightening has large contractionary effects onto both advanced and emerging economies. Second, flexible exchange rates cannot fully insulate domestic economies, due to movements in risk premia that limit central banks' ability to control the yield curve. Third, financial channels dominate over demand and exchange rate channels in the transmission to real variables, while the transmission via oil and commodity prices determines nominal spillovers.

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  • Riccardo Degasperi & Seokki Simon Hong & Giovanni Ricco, 2021. "The global transmission of U.S. monetary policy," Working Papers hal-03373749, HAL.
    • Handle: RePEc:hal:wpaper:hal-03373749
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03373749
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    Keywords

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

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • 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

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