International Transmission through Relative Prices
We examine how U.S. monetary and fiscal policy shocks affect emerging marketsâ€™ aggregate economy. We find that emerging marketsâ€™ reaction to U.S. policy shocks differ widely from those of industrialized countries. Expansionary policies tend to depreciate the currencies of emerging markets, while appreciating the currencies of European economies. Moreover, net exports rise significantly in emerging markets, suggesting strong spillovers from the demand channel. All of these results are opposite of the predictions of a standard model. We examine whether incorporating a more realistic structure of trade can help understand the differential impact of policy spillovers to industrialized and emerging economies alike.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
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