Reassessing International Effects of U.S. Monetary Policy Shocks

Elizaveta Lukmanova and Katrin Rabitsch
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Elizaveta Lukmanova: Central Bank of Ireland and KU Leuven
Katrin Rabitsch: Vienna University of Economics and Business (WU)

International Journal of Central Banking, 2026, vol. 22, issue 2, 399-442

Abstract: In light of recent evidence on the significant contribution of persistent monetary shocks to inflation dynamics in the U.S., we study their international transmission. In contrast to standard temporary nominal interest rate shocks, persistent shocks increase long-run inflation and the nominal rate while decreasing the real rate. We find that this leads to nonnegligible international spillovers and dollar depreciation. We further show that when it comes to understanding the international spillover effects of U.S. monetary policy, persistent monetary policy shocks rather than temporary nominal interest rate shocks have the potential to explain long-run comovements of macroeconomic variables across advanced countries.

Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2026:q:2:a:6

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