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The open economy consequences of U.S. monetary policy

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  • Bluedorn, John C.
  • Bowdler, Christopher

Abstract

We consider the open economy consequences of U.S. monetary policy, extending the identification approach of Romer and Romer (2004) and adapting it for use with asset prices. Intended policy changes are orthogonalized against the economy's expected future path, which captures any effects from open economy variables. Estimated from a set of bilateral VARs, the dynamic responses of the exchange rate, foreign interest rate, and foreign output are consistent with recent work that identifies U.S. policy via futures market changes and a priori impulse response bounds. We compare the two approaches, finding important commonalities. We also outline some advantages of our approach.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 30 (2011)
Issue (Month): 2 (March)
Pages: 309-336

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Handle: RePEc:eee:jimfin:v:30:y:2011:i:2:p:309-336

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Web page: http://www.elsevier.com/locate/inca/30443

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Keywords: Open economy monetary policy identification Exchange rate adjustment Interest rate pass-through;

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References

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  1. Kenneth N. Kuttner, 2000. "Monetary policy surprises and interest rates: evidence from the Fed funds futures markets," Staff Reports 99, Federal Reserve Bank of New York.
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Citations

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Cited by:
  1. Juha Tervala, 2011. "Learning by Devaluating: A Supply-Side Effect of Competitive Devaluation," Discussion Papers 67, Aboa Centre for Economics.
  2. Bluedorn, John & Bowdler, Christopher, 2006. "Open economy codependence: US monetary policy and interest rate pass-through," Discussion Paper Series In Economics And Econometrics 0615, Economics Division, School of Social Sciences, University of Southampton.
  3. Philipp Engler, 2011. "Monetary Policy and Unemployment in Open Economies," NCER Working Paper Series 77, National Centre for Econometric Research.
  4. Tervala, Juha, 2012. "International welfare effects of monetary policy," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 356-376.
  5. Bluedorn, John C. & Bowdler, Christopher & Koch, Christoffer, 2014. "Heterogeneous bank lending responses to monetary policy: new evidence from a real-time identification," Working Papers 1404, Federal Reserve Bank of Dallas.
  6. Tervala, Juha, 2014. "China, the Dollar Peg and U.S. Monetary Policy," MPRA Paper 53223, University Library of Munich, Germany.
  7. John C Bluedorn & Christopher Bowdler & Christoffer Koch, 2013. "Heterogeneous Bank Lending Responses to Monetary Policy," IMF Working Papers 13/118, International Monetary Fund.
  8. Delis, Manthos D & Hasan, Iftekhar & Mylonidis, Nikolaos, 2011. "The risk-taking channel of monetary policy in the USA: Evidence from micro-level data," MPRA Paper 34084, University Library of Munich, Germany.

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