nep-ifn New Economics Papers
on International Finance
Issue of 2023‒02‒13
three papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. The Global Transmission of U.S. Monetary Policy By Riccardo Degasperi; Seokki Simon Hong; Giovanni Ricco
  2. Bottleneck effects of monetary policy By Emilia Garcia-Appendini; Frédéric Boissay; Steven Ongena
  3. Global payment disruptions and firm-level exports By Haas, Ralph$cde; Kirschenmann, Karolin; Schultz, Alison

  1. By: Riccardo Degasperi (DG Economics, Statistics and Research, Rome, Italy); Seokki Simon Hong (Paris School of Economics, Paris, France); Giovanni Ricco (CREST – Ecole Polytechnique, Palaiseau, France)
    Abstract: US monetary policy shapes economic conditions globally due to the dominant role of the dollar in the world economy. We study the propagation of US monetary policy shocks abroad using a state-of-the-art high-frequency identification and a harmonised dataset covering 30 economies and over 150, 000 datapoints. A policy tightening has large contractionary effects on both advanced and emerging economies. The propagation via financial variables limits foreign central banks’ control over domestic economic conditions by increasing risk premia and by destabilising the medium-long segment of the yield curve. The responses of headline prices abroad are instead shaped by spillovers via commodity markets.
    Keywords: Monetary policy, Trilemma, Exchange Rates, Monetary Policy Spillovers.
    JEL: E5 F3 F4 C3
    Date: 2022–01–13
  2. By: Emilia Garcia-Appendini (University of Zurich - Department of Banking and Finance); Frédéric Boissay (Bank for International Settlements (BIS)); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))
    Abstract: Is monetary policy transmitted through markets for intermediate goods? Analyzing US data on corporate linkages, we document that the financial health of downstream and upstream firms plays a key role in monetary policy transmission. Our estimates suggest that contractionary changes in monetary conditions lead to reductions in demand and supply of financially constrained firms downstream and upstream. These reductions create bottlenecks inducing the "middle" linked firms to curtail their own activities. Overall these "bottleneck effects" coming from changes in demand and supply by constrained partners have a larger impact on a firm's operations than the firm's own financial conditions.
    Keywords: Monetary policy transmission, supply chain, aggregate demand, cost channel.
    JEL: E52 G32
    Date: 2022–12
  3. By: Haas, Ralph$cde; Kirschenmann, Karolin; Schultz, Alison
    Abstract: We exploit proprietary information on severed correspondent banking relationships - due to the stricter enforcement of financial crime regulation - to assess how payment disruptions impede cross-border trade. Using firm-level export data from emerging Europe, we show that when local respondent banks lose access to correspondent banking services, their corporate borrowers start to export less. This trade decline occurs on both the extensive and intensive margins and firms do not substitute foregone exports with higher domestic sales. As a result, total firm revenues and employment shrink. These findings highlight an often overlooked function of global banks: providing the payment infrastructure that enables firms in less-developed countries to export to richer parts of the world.
    Keywords: Correspondent banking, payment infrastructure, global banks, international trade, anti-money laundering
    JEL: F14 F15 F36 G21 G28
    Date: 2022

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