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Monetary policy spillovers among five systemic economies: Evidence from the time and frequency domains

Author

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  • Guo, Junjie
  • Li, Xuelian
  • Zhang, Weiran
  • Li, Youshu

Abstract

Using the spillover index and frequency decomposition approach, this study explores the direction and magnitude of cross-border monetary policy spillovers among five systemic economies (S5): the United States, the Euro area, Japan, the United Kingdom, and China. The results suggest that China is the largest receiver and delivers the least to the other countries. Further, the findings reveal that massive monetary easing led by unconventional monetary policy implemented at home can transmit spillovers abroad. Notably, the overall spillover index peaks during a crisis. Moreover, both the static and dynamic frequency results show that short-term effects dominate spillovers. These findings suggest that both policymakers and investors should prevent foreign beggar-thy-neighbour monetary policies.

Suggested Citation

  • Guo, Junjie & Li, Xuelian & Zhang, Weiran & Li, Youshu, 2024. "Monetary policy spillovers among five systemic economies: Evidence from the time and frequency domains," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:ecofin:v:70:y:2024:i:c:s1062940824000019
    DOI: 10.1016/j.najef.2024.102077
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    Keywords

    Monetary policy; Spillover; Systemic economies; Frequency; COVID-19;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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