Working Paper: CEPR ID: DP10592
Authors: Evgenia Passari; Hélène Rey
Abstract: We review the findings of the literature on the benefits of international financial flows and find that they are quantitatively elusive. We then present evidence on the existence of a global cycle in gross cross border flows, asset prices and leverage and discuss its impact on monetary policy autonomy across different exchange rate regimes. We focus in particular on the effect of US monetary policy shocks on the UK's financial conditions.
Keywords: financial integration; monetary policy
JEL Codes: E5; F3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| US monetary policy shocks (E39) | UK mortgage spread (G21) |
| US monetary tightening (E49) | increased financial conditions in the UK (F65) |
| US monetary policy shocks (E39) | global financial cycle (F65) |
| US monetary policy tightening (E52) | VIX response (C58) |
| UK financial conditions (E49) | respond to US monetary policy shocks (E39) |