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Working Paper
Output Spillovers from U.S. Monetary Policy: The Role of International Trade and Financial Linkages
We estimate that U.S. monetary policy has sizable spillover effects on global economic activity. In response to a surprise increase in the federal funds rate of 25 basis points, real output in our sample of 44 countries declines on average by 0.9% after three years. We find that international trade is a more important factor than international finance in explaining these spillovers. In particular, countries with a high share of exports and imports in output have 79% larger responses than countries with a low share, whereas we do not find significant heterogeneity depending on a country’s ...
Working Paper
The Transmission Mechanisms of International Business Cycles: Output Spillovers through Trade and Financial Linkages
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 Paper
The Macroeconomics of Labor, Credit and Financial Market Imperfections
An increasing share of corporate loans, a critical source of firm credit, are sold off banks’ balance sheets and actively traded in a secondary over-the-counter market. We develop a microfounded equilibrium search-theoretic model with labor, credit and financial markets to explore how this secondary loan market affects the real economy, highlighting a trade-off: while the market reduces the steady-state level of unemployment by 0.6pp, it amplifies its response to a 1% productivity drop from 3.6% to 4.3%. Secondary market frictions matter significantly: eliminating them would not only reduce ...