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U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data

Author

Listed:
  • Ms. Elif C Arbatli Saxegaard
  • Melih Firat
  • Davide Furceri
  • Jeanne Verrier

Abstract

We examine three main channels through which U.S. monetary policy shocks affect firm investment in foreign countries: (1) the balance sheet channel; (2) the financial channel of the exchange rate; and (3) the trade channel. For this purpose, we use quarterly firm-level data for 63 advanced economies (AEs) and emerging market and developing economies (EMDEs) over 1996-2016. Our results suggest an important and independent role for all three key channels. U.S. monetary policy shocks have larger effects on investment for firms that are more leveraged (balance sheet channel), for firms that have a higher share of debt in foreign currency (financial channel of the exchange rate), and for firms that operate in sectors with higher export dependence (trade channel). Back-of-the-envelope calculations suggest that the balance sheet channel is the most important channel of transmission of U.S. monetary policy shocks on aggregate firm investment.

Suggested Citation

  • Ms. Elif C Arbatli Saxegaard & Melih Firat & Davide Furceri & Jeanne Verrier, 2022. "U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data," IMF Working Papers 2022/191, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2022/191
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    Cited by:

    1. Julian di Giovanni & John Rogers, 2024. "The Impact of U.S. Monetary Policy on Foreign Firms," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(1), pages 58-115, March.
    2. Coman, Andra, 2023. "Monetary policy spillovers and the role of prudential policies in the European Union," Working Paper Series 2854, European Central Bank.
    3. André Sanchez Pacheco, . "Consolidated foreign wealth of nations: Nationality-based measures of international exposure," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.

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