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Working Paper
Unconventional Monetary Policy, (A)Synchronicity and the Yield Curve
Dilts Stedman, Karlye (2019-10-31)
This paper examines international spillovers from unconventional monetary policy between the United States, the euro area, the United Kingdom and Japan, and assesses the influence of asynchronous policy normalization on the slope of the yield curve. Using high frequency futures data to identify monetary policy surprises and controlling for contemporaneous news, I find that spillovers increase during periods of unconventional monetary policy and strengthen during asynchronous policy normalization. Local projections suggest persistent spillovers from the Federal Reserve, whereas other ...
Research Working Paper , Paper RWP 19-9

Report
Spillovers and Spillbacks
Acharya, Sushant; Pesenti, Paolo (2024-03-01)
We study international monetary policy spillovers and spillbacks in a tractable two-country Heterogeneous Agent New Keynesian model. Relative to Representative Agent (RANK) models, our framework introduces a precautionary-savings channel, as households in both countries face uninsurable income risk, and a real-income channel, as households have heterogeneous marginal propensities to consume (MPC). While both channels amplify the size of spillovers/spillbacks, only precautionary savings can change their sign relative to RANK. Spillovers are likely to be larger in economies with higher ...
Staff Reports , Paper 1089

Working Paper
Dominant-Currency Pricing and the Global Output Spillovers from U.S. Dollar Appreciation
Georgiadis, Georgios; Schumann, Ben (2019-09-04)
Different export-pricing currency paradigms have different implications for a host of issues that are critical for policymakers such as business cycle co-movement, optimal monetary policy, optimum currency areas and international monetary policy coordination. Unfortunately, the literature has not reached a consensus on which pricing paradigm best describes the data. Against this background, we test for the empirical relevance of dominant-currency pricing (DCP). Specifically, we first set up a structural three-country New Keynesian dynamic stochastic general equilibrium model which nests DCP, ...
Globalization Institute Working Papers , Paper 368

Working Paper
The Transmission Mechanisms of International Business Cycles: Output Spillovers through Trade and Financial Linkages
Bräuning, Falk; Sheremirov, Viacheslav (2021-10-01)
We study the transmission channels through which shocks affect the global economy and the cross-country comovement of real economic activity. For this purpose, we collect detailed data on international trade and financial linkages as well as domestic macro and financial variables for a large set of countries. We document significant international output comovement following U.S. monetary shocks, and find that openness to international trade matters more than financial openness in explaining cross-country spillovers. In particular, output in countries with a high share of exports and imports ...
Working Papers , Paper 21-13

Discussion Paper
Global Supply Chains and U.S. Import Price Inflation
Amiti, Mary; Itskhoki, Oleg; Weinstein, David E. (2024-03-04)
Inflation around the world increased dramatically with the reopening of economies following COVID-19. After reaching a peak of 11 percent in the second quarter of 2021, world trade prices dropped by more than five percentage points by the middle of 2023. U.S. import prices followed a similar pattern, albeit with a lower peak and a deeper trough. In a new study, we investigate what drove these price movements by using information on the prices charged for products shipped from fifty-two exporters to fifty-two importers, comprising more than twenty-five million trade flows. We uncover several ...
Liberty Street Economics , Paper 20240304

Working Paper
The International Spillovers of Synchronous Monetary Tightening
Caldara, Dario; Ferrante, Francesco; Iacoviello, Matteo; Prestipino, Andrea; Queraltó, Albert (2023-11-29)
We use historical data and a calibrated model of the world economy to study how a synchronous monetary tightening can amplify cross-border transmission of monetary policy. The empirical analysis shows that historical episodes of synchronous tightening are associated with tighter financial conditions and larger effects on economic activity than asynchronous ones. In the model, a sufficiently large synchronous tightening can disrupt intermediation of credit by global financial intermediaries causing large output losses and an increase in sacrifice ratios, that is, output lost for a given ...
International Finance Discussion Papers , Paper 1384

Working Paper
Global Financial Cycles and Risk Premiums
Jordà, Òscar; Ward, Felix; Taylor, Alan M.; Schularick, Moritz (2018-06-11)
This paper studies the synchronization of financial cycles across 17 advanced economies over the past 150 years. The comovement in credit, house prices, and equity prices has reached historical highs in the past three decades. The sharp increase in the comovement of global equity markets is particularly notable. We demonstrate that fluctuations in risk premiums, and not risk-free rates and dividends, account for a large part of the observed equity price synchronization after 1990. We also show that U.S. monetary policy has come to play an important role as a source of fluctuations in risk ...
Working Paper Series , Paper 2018-5

Working Paper
Sustainable international monetary policy cooperation
Sunakawa, Takeki; Kam, Timothy; Fujiwara, Ippei (2015-04-01)
Globalization Institute Working Papers , Paper 234

Working Paper
Risk-Taking Spillovers of U.S. Monetary Policy in the Global Market for U.S. Dollar Corporate Loans
Lee, Seung Jung; Stebunovs, Viktors; Liu, Lucy Qian (2019-07-23)
We study the effects of U.S. interest rates and other factors on risk-taking in the global market for U.S. dollar syndicated term loans. We find that, before the Global Financial Crisis, both U.S. and non-U.S. lenders originated ex ante riskier loans to non-U.S. borrowers in response to a decline in short-term U.S. interest rates and, after the crisis, in response to a decline in longer-term U.S. interest rates. After the crisis, this behavior was more prominent for shadow banks and less prominent for banks with relatively low capital. Separately, before the crisis, lenders originated less ...
International Finance Discussion Papers , Paper 1251

Working Paper
The Long-Run Effects of Monetary Policy
Singh, Sanjay R.; Taylor, Alan M.; Jordà, Òscar (2020-01-16)
Is the effect of monetary policy on the productive capacity of the economy long lived? Yes, in fact we find such impacts are significant and last for over a decade based on: (1) merged data from two new international historical databases; (2) identification of exogenous monetary policy using the macroeconomic trilemma; and (3) improved econometric methods. Notably, the capital stock and total factor productivity (TFP) exhibit hysteresis, but labor does not. Money is non-neutral for a much longer period of time than is customarily assumed. A New Keynesian model with endogenous TFP growth can ...
Working Paper Series , Paper 2020-01

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