The Alignment of Monetary Policy in Foreign Countries with the Federal Reserve Bank’s Monetary Policy: Evidence from Fixed and Floating Exchange Rate Regimes

Hatem Al-Hindawi (), Ala’ Bashayreh () and Samer Abdelhadi ()
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Hatem Al-Hindawi: The Hashemite University, Department of Economics, Business School, Zarqa, Jordan
Ala’ Bashayreh: The Hashemite University, Department of Economics, Business School, Zarqa, Jordan
Samer Abdelhadi: The Hashemite University, Department of Economics, Business School, Zarqa, Jordan

Journal of Central Banking Theory and Practice, 2025, vol. 14, issue 2, 29-46

Abstract: The study participates in adding a new term to the monetary policy literature which is the alignment of monetary policies between foreign countries and the Federal Reserve Bank’s policy. This study aims to examine the effect of the of the monetary policy alignment in foreign countries with the Federal Reserve Bank’s monetary policy variable on gross domestic product and consumer price index in two groups of countries. Using the fixed effect model, results differed between countries that follow fixed exchange rates and others that follow floating exchange rate regimes. The study reveals that the alignment of domestic monetary policy in countries that follow a floating exchange rate regime is not symmetric with the Federal Reserve Bank’s monetary policy, while the model for countries with a fixed exchange rate regime is not reliable.

Keywords: Alignment of Monetary Policy; Federal Reserve Bank; Monetary Policy; Interest Rate on Deposits; Exchange Rate Regimes; Fixed Effect. (search for similar items in EconPapers)
JEL-codes: E4 E5 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:14:y:2025:i:2:p:29-46

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