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Report
U.S. Monetary Policy Spillovers to Emerging Markets: Both Shocks and Vulnerabilities Matter
Akinci, Ozge; Ahmed, Shaghil; Queraltó, Albert (2021-06-01)
We use a macroeconomic model to explore how policy drivers and country vulnerabilities matter for the transmission of U.S. monetary policy shifts to emerging markets. Our model features imperfections in domestic and international financial markets and imperfectly anchored inflation expectations. We show that higher U.S. interest rates arising from stronger U.S. demand generate modestly positive spillovers to activity in emerging markets with stronger fundamentals, but can be adverse for vulnerable countries. In contrast, U.S. monetary tightenings driven by a more-hawkish policy stance cause a ...
Staff Reports , Paper 972

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

Speech
Is there room for more monetary cooperation?: panel discussion remarks at the Global Financial Stability in a New Monetary Environment conference, Paris, France
Potter, Simon M. (2016-09-30)
Panel discussion remarks at the Global Financial Stability in a New Monetary Environment conference, Paris, France.
Speech , Paper 218

Discussion Paper
How Large are Default Spillovers in the U.S. Financial System?
Duarte, Fernando M.; Jones, Collin; Ruela, Francisco (2019-06-26)
When a financial firm defaults on its counterparties, the counterparties may in turn become unable to pay their own creditors, and so on. This domino effect can quickly propagate through the financial system, creating undesirable spillovers and unnecessary defaults. In this post, the authors use the framework discussed in the first post of this two-part series to answer the question: How vulnerable is the U.S. financial system to default spillovers?
Liberty Street Economics , Paper 20190626

Report
International banking and cross-border effects of regulation: lessons from the United States
Niepmann, Friederike; Goldberg, Linda S.; Berrospide, Jose M.; Correa, Ricardo (2016-09-01)
Domestic prudential regulation can have unintended effects across borders and may be less effective in an environment where banks operate globally. Using U.S. micro-banking data for the first quarter of 2000 through the third quarter of 2013, this study shows that some regulatory changes indeed spill over. First, a foreign country?s tightening of limits on loan-to-value ratios and local currency reserve requirements increase lending growth in the United States through the U.S. branches and subsidiaries of foreign banks. Second, a foreign tightening of capital requirements shifts lending by ...
Staff Reports , Paper 793

Discussion Paper
Monetary Policy Spillovers in the Global Economy
Acharya, Sushant; Akinci, Ozge; Miranda-Agrippino, Silvia; Pesenti, Paolo (2025-04-07)
Understanding cross-border interdependencies and inspecting the international transmission mechanism of policy shocks is the raison d’être of open-economy macroeconomics as an intellectual discipline. The relevance for the policy debate is pervasive: over and over in the history of the international monetary system national policymakers have pointed at — and voiced concerns about—the effects of policy actions undertaken in foreign countries on the outlook and financial conditions in their own domestic economies. The most recent example involves the spillovers of tighter monetary ...
Liberty Street Economics , Paper 20250407a

Journal Article
Dealing with Monetary Policy Spillovers
Sablik, Timothy (2019-01)
Fed policy has effects outside U.S. borders, but what can monetary policymakers here and abroad do about it?
Econ Focus , Issue 1Q , Pages 3-5

Working Paper
Credit Default Swaps in General Equilibrium: Spillovers, Credit Spreads, and Endogenous Default
Darst, Matt; Refayet, Ehraz (2016-04-19)
This paper highlights two new effects of credit default swap markets (CDS) in a general equilibrium setting. First, when firms' cash flows are correlated, CDSs impact the cost of capital{credit spreads{and investment for all firms, even those that are not CDS reference entities. Second, when firms internalize the credit spread changes, the incentive to issue safe rather than risky bonds is fundamentally altered. Issuing safe debt requires a transfer of profits from good states to bad states to ensure full repayment. Alternatively, issuing risky bonds maximizes profits in good states at the ...
Finance and Economics Discussion Series , Paper 2016-042

Discussion Paper
The Growing Risk of Spillovers and Spillbacks in the Bank‑NBFI Nexus
Acharya, Viral V.; Cetorelli, Nicola; Tuckman, Bruce (2024-06-20)
Nonbank financial institutions (NBFIs) are growing, but banks support that growth via funding and liquidity insurance. The transformation of activities and risks from banks to a bank-NBFI nexus may have benefits in normal states of the world, as it may result in overall growth in (especially, credit) markets and widen access to a wide range of financial services, but the system may be disproportionately exposed to financial and economic instability when aggregate tail risk materializes. In this post, we consider the systemic implications of the observed build-up of bank-NBFI connections ...
Liberty Street Economics , Paper 20240620

Report
Cross-border prudential policy spillovers: how much? How important? Evidence from the International Banking Research Network
Goldberg, Linda S.; Buch, Claudia M. (2016-11-01)
The development of macroprudential policy tools has been one of the most significant changes in banking regulation in recent years. In this multi-study initiative of the International Banking Research Network, researchers from fifteen central banks and two international organizations use micro-banking data in conjunction with a novel data set of prudential instruments to study international spillovers of prudential policy changes and their effects on bank lending growth. The collective analysis has three main findings. First, the effects of prudential instruments sometimes spill over borders ...
Staff Reports , Paper 801

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