International transmission of quantitative easing policies: Evidence from Canada

Serdar Kabaca and Kerem Tuzcuoglu

Journal of Economic Dynamics and Control, 2024, vol. 162, issue C

Abstract: What are the cross-border spillovers from major economies' quantitative easing policies to their trading partners? We provide evidence by concentrating on spillovers from the US to Canada during the ZLB period when QE policies were actively used. We identify QE shocks in the US and estimate their impact on a large number of Canadian macroeconomic and financial variables. Then we analyze transmission channels of foreign QE shocks to the domestic economy. Our results suggest that US QE shocks are expansionary for Canada despite a currency appreciation. This is because they spill over to domestic borrowing costs, lowering long-term rates as well as financial premiums, and increasing asset prices. We find evidence for both portfolio balance and risk channels.

Keywords: Unconventional monetary policy; Transmission channels; Portfolio balance channel; Risk channel (search for similar items in EconPapers)
JEL-codes: E52 F41 F44 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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Working Paper: International Transmission of Quantitative Easing Policies: Evidence from Canada (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:162:y:2024:i:c:s0165188924000411

DOI: 10.1016/j.jedc.2024.104849

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