When the FedSneezes, the Cold is Transmitted by Trade

Santiago Camara (), Lawrence J. Christiano () and Husnu Dalgic ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: We investigate the global transmission of US monetary policy shocks. The existing literature finds that a US monetary contraction causes a contraction in economic activity not only in the US but also abroad. This sharply contradicts the traditional Mundell-Fleming view. Much of the existing literature refers to frictions in international financial markets as reasons for the failure of the traditional view. Instead, we argue that trade is key for understanding the transmission of US monetary policy shocks.

Keywords: Monetary policy spillovers; Trade channel; Small open economy DSGE models; Exchange rates. (search for similar items in EconPapers)
JEL-codes: E44 E52 F31 F32 F41 (search for similar items in EconPapers)
Pages: 19
Date: 2026-09
New Economics Papers: this item is included in nep-cba, nep-dge, nep-fdg, nep-ifn and nep-mon
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