The Transmission of International Monetary Policy Shocks to Firms' Expectations

Serafin Frache (), Rodrigo Lluberas, Mathieu Pedemonte and Javier Turen

No 2204, Documentos de Trabajo/Working Papers from Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo.

Abstract: Motivated by the dominant role of the US dollar, we explore how monetary policy (MP) shocks in the US can affect a small open economy through the expectation channel. We combine data from a panel survey of firms’ expectations in Uruguay with granular information about firms’ debt position and total imports on a monthly basis. We show that a contractionary MP shock in the US reduces firms’ inflation and cost expectations in Uruguay. This result contrasts with the inflationary effect of this shock on the Uruguayan economy, suggesting uncertainty about the policy regime. We discuss the issues and challenges of this expectation channel.

Keywords: Firms’ Expectations; Global Financial Cycle; Monetary Policy Spillovers (search for similar items in EconPapers)
JEL-codes: D84 E31 E58 E71 F41 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:mnt:wpaper:2204

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