U.S. Monetary Policy Normalization and Global Interest Rates

Cáceres, Carlos; Carrière‐Swallow, Yan; Demir, Ishak; Gruss, Bertrand

doi:10.2139/ssrn.2882633

Cited by 5 publications

(1 citation statement)

References 21 publications

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“…The existing approaches link innovations in short-term rates across countries using a vector autoregression (VAR) framework, but they either suffer identification or power concerns. One approach, taken by Rey (2015), Caceres et al (2016), Hofmann and Takats (2015), and Takats and Vela (2014), measures whether innovations to US rates predict current or future innovations to foreign rates. This raises the concern of omitted factors such as global or regional growth shocks, articulated by Bernanke (2017) among others.…”

Section: Introductionmentioning

confidence: 99%

Doubly heterogeneous monetary spillovers

Shah

2022

International Finance

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Monetary spillovers are heterogeneous in two ways: how central banks generate them and how countries receive them. First, the Fed is mostly unique in its ability to affect other countries' financial markets, among ten developed central banks. This is noteworthy given the lack of data on other central banks' spillovers. This paper makes public a novel data set of these ten central banks' monetary shocks to support future research. Second, the Fed affects recipient countries in different ways, with the bonds and currencies of countries with high-interest rates reacting differently than those of low-rate countries. This can help shed light on theories around the Fed's spillovers, and this paper demonstrates how the exact pattern is inconsistent with models in which developed central banks react to the Fed.

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Section: Introductionmentioning

confidence: 99%