Working Paper: CEPR ID: DP16134
Authors: Michele Cazorzi; Luca Dedola; Georgios Georgiadis; Marek Jarocinski; Livio Stracca; Georg Strasser
Abstract: This paper compares the international transmission of European Central Bank (ECB) and Federal Reserve System (Fed) monetary policy in a unified framework, identifying pure monetary policy shocks purged of bias from central bank information effects. The estimates reveal a stark asymmetry in the global spillovers from ECB and Fed monetary policy: Fed monetary policy shocks have a significant impact on euro area financial conditions and real activity, while ECB monetary policy shocks do not have a similar effect on the United States (US). Fed monetary policy shocks also affect real and financial variables in the rest of the world more than ECB monetary policy shocks.
Keywords: monetary policy; spillovers; monetary policy shocks; international transmission
JEL Codes: E44; E52; F3; E58; F42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Fed monetary policy shocks (E52) | Euro area financial conditions (F36) |
| Fed monetary policy shocks (E52) | real activity in Euro area (O52) |
| Fed monetary policy shocks (E52) | Euro depreciation (F36) |
| Fed monetary policy shocks (E52) | Euro area inflation (E31) |
| ECB monetary policy shocks (E52) | US financial markets (G10) |
| ECB monetary policy shocks (E52) | real activity in US (N12) |
| Fed monetary policy shocks (E52) | emerging market economies (EMEs) financial conditions (F65) |
| Fed monetary policy shocks (E52) | emerging market economies (EMEs) real activity (F41) |
| ECB monetary policy shocks (E52) | trade and commodity prices (F19) |