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A Tale of Two Global Monetary Policies

In: NBER International Seminar on Macroeconomics 2021

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  • Silvia Miranda-Agrippino
  • Tsvetelina Nenova

Abstract

We compare the macroeconomic and financial spillovers of the unconventional monetary policies of the Fed and the ECB. Monetary policy tightenings in the two areas are followed by a contraction in global activity and trade, a retrenchment in global capital flows, a fall in global stock markets, and a rise in risk aversion. Bilateral spillovers in both directions are also powerful. We find that Fed and ECB monetary policies propagate internationally through the same channels – trade and risk-taking. While the magnitude of ECB spillovers to global aggregates is smaller, proxies for global risk aversion respond in the same way and to the same degree to ECB and Fed unconventional monetary policy shocks, pointing to an equally powerful risk-taking channel for their international transmission that operates through global financial markets. Spillovers of the unconventional policies of the two central banks to international asset prices are equivalent to a very large extent.
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Suggested Citation

  • Silvia Miranda-Agrippino & Tsvetelina Nenova, 2021. "A Tale of Two Global Monetary Policies," NBER Chapters, in: NBER International Seminar on Macroeconomics 2021, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:14595
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    2. Corneli, Flavia & Ferriani, Fabrizio & Gazzani, Andrea, 2023. "Macroeconomic news, the financial cycle and the commodity cycle: The Chinese footprint," Economics Letters, Elsevier, vol. 231(C).
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    4. Nicolas Groshenny & Naveed Javed, 2023. "Dornbusch’s overshooting and the systematic component of monetary policy in SOE-SVARs," TEPP Working Paper 2023-08, TEPP.
    5. Bekaert, Geert & Hoerova, Marie & Xu, Nancy, 2023. "Risk, Monetary Policy and Asset Prices in a Global World," CEPR Discussion Papers 18229, C.E.P.R. Discussion Papers.
    6. Camehl, Annika & von Schweinitz, Gregor, 2023. "What explains international interest rate co-movement?," IWH Discussion Papers 3/2023, Halle Institute for Economic Research (IWH), revised 2023.
    7. Christoph E. Boehm & T. Niklas Kroner, 2020. "The US, Economic News, and the Global Financial Cycle," Working Papers 677, Research Seminar in International Economics, University of Michigan.
    8. Jarociński, Marek, 2022. "Central bank information effects and transatlantic spillovers," Journal of International Economics, Elsevier, vol. 139(C).
    9. Axelsson, Birger & Song, Han-Suck, 2023. "The effect of quantitative easing and quantitative tightening on U.S. equity REIT returns," Working Paper Series 23/9, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance, revised 14 Nov 2023.
    10. Roccazzella, Francesco & Candelon, Bertrand, 2022. "Should we care about ECB inflation expectations?," LIDAM Discussion Papers LFIN 2022004, Université catholique de Louvain, Louvain Finance (LFIN).
    11. Lu, Dong & Tang, Huoqing & Zhang, Chengsi, 2023. "China's monetary policy surprises and corporate real investment," China Economic Review, Elsevier, vol. 77(C).
    12. Georgiadis, Georgios & Jarociński, Marek, 2023. "Global spillovers from multi-dimensional US monetary policy," Working Paper Series 2881, European Central Bank.
    13. De Santis, Roberto A. & Zimic, Srečko, 2022. "Interest rates and foreign spillovers," European Economic Review, Elsevier, vol. 144(C).
    14. Sinem Kandemir & Peter Tillmann, 2023. "Not all ECB meetings are created equal," MAGKS Papers on Economics 202312, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    15. Ciminelli, Gabriele & Rogers, John & Wu, Wenbin, 2022. "The effects of U.S. monetary policy on international mutual fund investment," Journal of International Money and Finance, Elsevier, vol. 127(C).
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    18. Braun, Robin & Miranda-Agrippino, Silvia & Saha, Tuli, 2023. "Measuring monetary policy in the UK: the UK Monetary Policy Event‑Study Database," Bank of England working papers 1050, Bank of England.
    19. Karau, Sören, 2023. "Monetary policy and Bitcoin," Journal of International Money and Finance, Elsevier, vol. 137(C).

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    More about this item

    JEL classification:

    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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