| Abstract: |
This paper studies the transmission of US monetary shocks across the globe by
employing a high-frequency identification of policy shocks and large VAR
techniques, in conjunction with a large macro-financial dataset of global and
national indicators covering both advanced and emerging economies. Our
identification controls for the information effects of monetary policy and
allows for the separate analysis of tightenings and loosenings of the policy
stance. First, we document that US policy shocks have large real and nominal
spillover effects that affect both advanced economies and emerging markets.
Policy actions cannot fully isolate national economies, even in the case of
advanced economies with flexible exchange rates. Second, we investigate the
channels of transmission and find that both trade and financial channels are
activated and that there is an independent role for oil and commodity prices.
Third, we show that effects are asymmetric and larger in the case of
contractionary US monetary policy shocks. Finally, we contrast the
transmission mechanisms of countries with different exchange rates, exposure
to the dollar, and capital control regimes |