The Puzzling Change in the International Transmission of US Macroeconomic Policy Shocks,
Chapter in NBER book NBER International Seminar on Macroeconomics 2020 (2021), Linda Tesar, editor We demonstrate a dramatic change over time in the international transmission of US monetary policy shocks. International spillovers from US interest rate policy have had a different nature since the 1990s than they did in post-Bretton Woods period. Our analysis is based on a panel of 21 high income and emerging market economies. Prior to the 1990s, the US dollar appreciated, and ex-US industrial production declined, in response to increases in the US Federal Funds Rate, as predicted by textbook open economy models. The past decades have seen a shift, whereby increases in US interest rates depreciate the US dollar but stimulate the rest of the world economy. Results are robust to several identification methods. We sketch a simple theory of exchange rate determination in face of interest-elastic risk aversion that rationalizes these findings. This chapter is not currently available on-line.
You may be able to access the full text of this document elsewhere. Machine-readable bibliographic record - MARC, RIS, BibTeX Document Object Identifier (DOI): 10.1016/j.jinteco.2021.103444 |
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