Global Spillovers of US Monetary Policy: New Insights from the Remittance Channel

This paper examines the global spillovers of US monetary policy through the remittance channel. We use Jordà (2005) local projections to assess the effects of a US monetary policy tightening on 8 major remittance-sending countries and 41 recipient countries over the period from January 1997 to December 2017. Our findings reveal that such monetary tightening significantly impacts not only the US economy but also key remittance-sending nations, resulting in a global contractionary effect. The impact on recipient countries varies based on their reliance on remittances, underscoring the dual role of these personal transfers as both an amplifier and a mitigator of the global business cycle. Specifically, countries with high dependency on remittances experience heightened pro-cyclicality, leading to declines in both output and inflation, while those with moderate or low reliance exhibit counter-cyclical behavior.