U.S. monetary policy shock spillovers: evidence from firm-level data

Elif Arbatli-Saxegaard, Melih Firat, Davide Furceri and Jeanne Verrier

Journal of International Money and Finance, 2025, vol. 158, issue C

Abstract: We examine three main channels through which U.S. monetary policy shocks affect firm investment in foreign countries: (1) the balance sheet channel; (2) the financial channel of the exchange rate; and (3) the trade channel. For this purpose, we use quarterly firm-level data for 63 advanced economies (AEs) and emerging market and developing economies (EMDEs) over 1996–2016. Our results suggest an important and independent role for all three key channels. U.S. monetary policy shocks have larger effects on investment for firms that are more leveraged (balance sheet channel), for firms that have a higher share of debt in foreign currency (financial channel of the exchange rate), and for firms that operate in sectors with higher export dependence (trade channel). Back-of-the-envelope calculations suggest that the balance sheet channel is the most important channel of transmission of U.S. monetary policy shocks on aggregate firm investment.

Keywords: U.S. monetary policy shocks; International spillovers; Investment; Firm heterogeneity (search for similar items in EconPapers)
JEL-codes: C3 D2 E5 F4 (search for similar items in EconPapers)
Date: 2025
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Working Paper: U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:158:y:2025:i:c:s0261560625001378

DOI: 10.1016/j.jimonfin.2025.103402

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