The international credit channel of U.S. monetary policy transmission to developing countries: Evidence from trade data

Shu Lin and Haichun Ye

Journal of Development Economics, 2018, vol. 133, issue C, 33-41

Abstract: In a large sector-level bilateral trade dataset, we find robust evidence supporting a broad international credit channel of U.S. monetary policy transmission to developing countries. We show that U.S. monetary policy has a significant effect on the sectoral composition of developing countries' exports. Financially more vulnerable sectors have a significantly more negative exposure of their trade to a tight U.S. monetary policy, especially in financially less developed exporting countries or during significant U.S. tightening periods. Moreover, we identify both a monetary policy dependence mechanism and a financial dollarization mechanism through which U.S. monetary policy can influence the sectoral composition of developing countries' exports.

Keywords: International transmission of U.S. monetary policy; International credit channel; Trade; Financial vulnerability; Developing countries (search for similar items in EconPapers)
JEL-codes: E44 E52 F14 F33 F42 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:133:y:2018:i:c:p:33-41

DOI: 10.1016/j.jdeveco.2018.01.007

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