While you’re here… help us stay here.

Are you enjoying open access to policy and research published by a broad range of organisations? Please donate today so that we can continue to provide this service.

Discussion paper

Explaining monetary spillovers: the matrix reloaded

Publisher
Fiscal policy Public finance Interest rates Monetary policy
Description

Abstract:

Using monetary policy shocks for 7 advanced economy central banks, measured at high frequency, we document the strength and characteristics of interest rate spillovers to 47 advanced and emerging market economies. Our main goal is to assess different channels through which spillovers occur and why some economies' interest rates respond more than others. We find that there is no evidence that spillovers relate to real linkages, such as trade flows. There is some indication that exchange rate regimes influence the extent of spillovers. By far the strongest determinant of interest rate spillovers is financial openness. Economies that have stronger bilateral (and aggregate) financial links with the United States or euro area are susceptible to stronger interest rate spillovers. These effects are much more pronounced at the longer end of the yield curve, indicating that while economies retain policy rate independence, financial conditions are influenced by global yields.

Publication Details
License type:
All Rights Reserved
Access Rights Type:
open
Issue:
RDP 2019-03