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A tale of two global monetary policies

Silvia Miranda Agrippino () and Tsvetelina Nenova ()
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Silvia Miranda Agrippino: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
Tsvetelina Nenova: London Business School

No 972, Bank of England working papers from Bank of England

Abstract: We compare the macroeconomic and financial spillovers of the unconventional monetary policies of the Fed and the ECB. Monetary policy tightenings in the two areas are followed by a contraction in global activity and trade, a retrenchment in global capital flows, a fall in global stock markets, and a rise in risk aversion. Bilateral spillovers are also powerful. Fed and ECB monetary policies propagate internationally through the same channels – trade and risk-taking – but the magnitude of ECB spillovers is smaller. We postulate that the relative importance of the euro and the US dollar in the international financial system can help to explain such asymmetries, and produce tentative evidence that links the strength of the ECB spillovers to € exposure in trade invoicing and the pricing of financial transactions.

Keywords: Unconventional monetary policy; high-frequency identification; international spillovers; Fed; ECB (search for similar items in EconPapers)
JEL-codes: E52 F42 G15 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2022-04-14
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fdg, nep-ifn, nep-mac, nep-mon and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0972

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