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Re-assessing international effects of U.S. monetary policy shocks

Author

Listed:
  • Elizaveta Lukmanova

    (Central Bank of Ireland)

  • Katrin Rabitsch

    (Vienna University of Economics (WU), Department of Economics)

Abstract

In light of recent evidence on the significant contribution of persistent monetary shocks to inflation dynamics in the U.S., we study their international transmission. In contrast to standard temporary nominal interest rate shocks, persistent shocks increase long-run inflation and the nominal rate while decreasing the real rate. We find that it leads to non-negligible international spillovers and dollar depreciation. We further show that when it comes to understanding the international spillover effects of U.S. monetary policy, persistent monetary policy shocks rather than temporary nominal interest rate shocks have the potential to explain long-run co-movements of macroeconomic variables across advanced countries.

Suggested Citation

  • Elizaveta Lukmanova & Katrin Rabitsch, 2025. "Re-assessing international effects of U.S. monetary policy shocks," Department of Economics Working Papers wuwp394, Vienna University of Economics and Business, Department of Economics.
    • Handle: RePEc:wiw:wiwwuw:wuwp394
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    Keywords

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    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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