ECB spillovers and domestic monetary policy effectiveness in small open economies

Saskia ter Ellen, Edvard Jansen and Nina Larsson Midthjell
Additional contact information
Edvard Jansen: Formuesforvaltning
Nina Larsson Midthjell: Norges Bank

No 2018/9, Working Paper from Norges Bank

Abstract: In this paper we study financial spillovers from the European Central Bank's (ECB) monetary policy and communication, and whether they have consequences for the effectiveness of domestic monetary policy of small open economies. Recent work suggests that the "trilemma" in international economics as we used to know it, is actually a dilemma: small open economies with floating exchange rate regimes can only have independent monetary policies when the capital account is managed. Our findings show that domestic monetary policy is still effective, but that spillover effects, particularly from the ECB's communication, reduce domestic control over the longer end of the yield curve.

Keywords: monetary policy; forward guidance; international spillovers; asset prices; small open economies (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 E58 G12 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2018-09-25
New Economics Papers: this item is included in nep-cba, nep-eec, nep-ifn, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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https://www.norges-bank.no/en/Published/Papers/Working-Papers/2018/92018/

Related works:
Journal Article: ECB Spillovers and domestic monetary policy effectiveness in small open economies (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2018_09

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