The Global Transmission of U.S. Monetary Policy

 

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How does US monetary policy affects the rest of the world? This paper provides evidence on how policy actions are transmitted across the global economy by employing a high frequency identification of policy shocks, together with large VAR techniques. We study the transmission of US monetary policy over a comprehensive set of global indicators, and national macroeconomic and financial variables covering both advanced and emerging economies. First, we document that a US monetary tightening induces symmetric macro and financial contractionary responses in the US and across the globe. This testi es the role of the dollar as a global currency. Second, we show that the spillovers of US monetary policy affect both advanced economies and emerging markets, irrespectively of their monetary policy regime. Finally, we investigate some of the channels through which the effects propagate and find a differential role for trade, exchange rates, liquidity flows, oil and commodity prices.

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© 2018 by Giovanni Ricco.

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