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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 ...
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 ...
The international transmission of monetary policy
This paper presents the novel results from an internationally coordinated project by the International Banking Research Network (IBRN) on the cross-border transmission of conventional and unconventional monetary policy through banks. Teams from seventeen countries use confidential micro-banking data for the years 2000 through 2015 to explore the international transmission of monetary policies of the United States, the euro area, Japan, and the United Kingdom. Two other studies use international data with different degrees of granularity. International spillovers into lending to the private ...
Liquidity traps, capital flows
Motivated by debates surrounding international capital flows during the Great Recession, we conduct a positive and normative analysis of capital flows when a region of the global economy experiences a liquidity trap. Capital flows reduce inefficient output fluctuations in this region by inducing exchange rate movements that reallocate expenditure toward the goods it produces. Restricting capital mobility hampers such an adjustment. From a global perspective, constrained efficiency entails subsidizing capital flows to address an aggregate demand externality associated with exchange rate ...
Panel remarks at Bank for International Settlements' annual general meeting, Basel, Switzerland
Remarks at the Bank for International Settlements' Annual General Meeting, Basel, Switzerland.