The transmission of U.S. monetary policy to small open economies

Francisco Nadal De Simone

Journal of International Money and Finance, 2024, vol. 142, issue C

Abstract: This paper studies the transmission of a U.S. monetary policy tightening to a set of small open economies. It uses as policy instruments Wu and Xia (2016) shadow rate, the Fed funds rate (conventional monetary policy, CMP) and changes in the Fed balance sheet (unconventional monetary policy, UMP). The main findings include: (1) the shock always reduces foreign economic activity and contributes to the emergence of a “global” financial cycle. (2) The financial channel has become more important since 2008. 3) There is evidence of an oil transmission channel. (4) Cross-country differences do not depend on their international trade volume, exchange rate flexibility or financial openness. U.S. policymakers may need to consider the feedback effects of changes in their policy stance on world demand and inflation. Small open economies should assess the type of U.S. monetary policy shock to evaluate the channels through which their economies may be affected.

Keywords: Monetary policy; International transmission; Small open economy; structural FAVAR (search for similar items in EconPapers)
JEL-codes: C38 E52 F42 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261560624000251
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:142:y:2024:i:c:s0261560624000251

DOI: 10.1016/j.jimonfin.2024.103038

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().