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A Tale of Two Global Monetary Policies

Author

Listed:
  • Silvia Miranda-Agrippino

    (Bank of England
    Centre for Macroeconomics (CFM)
    Centre for Economic Policy Research (CEPR))

  • Tsvetelina Nenova

    (London Business School)

Abstract
US monetary policy is not the only one with a global reach. We compare the international financial spillovers of the unconventional monetary policies of the Fed and the ECB. Monetary policy tightenings in both areas are followed by a global retrenchment in capital flows, a fall in global stock markets, and a rise in global risk measures. Thus, ECB and Fed monetary policies propagate internationally through equivalent transmission channels. ECB monetary policy shocks also affect significantly the US business and financial cycles. We produce tentative evidence that links the strength of the ECB international spillovers to the Euro exposure for both trade invoicing and the pricing of financial transactions.

Suggested Citation

  • Silvia Miranda-Agrippino & Tsvetelina Nenova, 2021. "A Tale of Two Global Monetary Policies," Discussion Papers 2117, Centre for Macroeconomics (CFM).
    • Handle: RePEc:cfm:wpaper:2117
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    More about this item

    Keywords

    Monetary Policy; Global Financial Cycle; International spillovers; Currency Pricing Paradigm; Fed; ECB;
    All these keywords.

    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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