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The International Transmission of U.S. Monetary Policy: New Evidence from Trade Data

Author

Listed:
  • Shu Lin

    (Fudan University and Hong Kong Institute for Monetary Research)

  • Haichun Ye

    (Shanghai University of Finance and Economics)

Abstract

We make the first attempt in the literature to empirically examine the spillover effects of U.S. monetary policy on trade in other countries. In a large sector-level bilateral trade dataset of 137 countries for the years 1970-2000, we find strong and robust evidence supporting an international credit channel of U.S. monetary policy transmission. We show that: 1) financially more constrained sectors have a more negative exposure of their trade to a tight U.S. monetary policy; 2) this international credit channel works mainly during significant U.S. monetary tightening periods (e.g., a large increase in interest rates); 3) the negative impact of a tight U.S. policy is significantly stronger in financially less developed countries or countries with no monetary autonomy.

Suggested Citation

  • Shu Lin & Haichun Ye, 2015. "The International Transmission of U.S. Monetary Policy: New Evidence from Trade Data," Working Papers 082015, Hong Kong Institute for Monetary Research.
  • Handle: RePEc:hkm:wpaper:082015
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    References listed on IDEAS

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    More about this item

    Keywords

    International Transmission of U.S. Monetary Policy; Trade; Credit Constraints; Credit Channel;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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