Re-assessing international effects of U.S. monetary policy shocks

Elizaveta Lukmanova () and Katrin Rabitsch ()
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Elizaveta Lukmanova: Central Bank of Ireland
Katrin Rabitsch: Vienna University of Economics (WU), Department of Economics

Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics

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 it leads to non-negligible 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 co-movements of macroeconomic variables across advanced countries.

Keywords: Monetary Policy; International spillovers; Long-run Inflation; Neo-Fisher effect (search for similar items in EconPapers)
JEL-codes: E12 E52 E58 F31 (search for similar items in EconPapers)
Date: 2025-12
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