A comparative assessment of the spillovers of US monetary policy shocks and its mitigation

Abhishek Rohit, Pradyumna Dash and D Rao ()

Economics Letters, 2020, vol. 197, issue C

Abstract: We conduct a comparative assessment of the spillovers of three types of Fed’s monetary policy surprises, i.e., Fed funds rate (FFR), Forward guidance (FG), and Large-scale asset purchases (LSAP) on monetary autonomy in the periphery economies (PEs). We find these shocks to be significant in causing loss of monetary autonomy in the PEs. We also find that the macroprudential tools mitigate the degree of such impairment. This holds for two types of macroprudential policies, i.e., borrower-targeted and financial institutions-targeted. We find both of them to be most effective against the FFR shocks. Comparing the macroprudential tools, we find the financial institutions-targeted tools to be more effective than the borrower-targeted ones in mitigating the degree of impairment against all types of Fed shocks.

Keywords: Trilemma; Macroprudential policy; Monetary policy surprises; Monetary autonomy; Local projections (search for similar items in EconPapers)
JEL-codes: E52 F65 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:197:y:2020:i:c:s0165176520303839

DOI: 10.1016/j.econlet.2020.109623

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