Spillovers of higher US interest rates
Iacoviello and Navarro using a comprehensive dataset containing observations on quarterly GDP and time-varying country characteristics for 50 foreign economies, both advanced and emerging, for over 50 years find that the traditional Mundell-Fleming-Dornbusch view of foreign spillovers is: a) consistent with the response of advanced economies; but b) at odds with the response of emerging economies, where trade and exchange rate exposure to the United States do not seem to matter. For emerging economies it’s the financial channel that seems to matter the most.
Foreign Effects of Higher U.S. Interest Rates
Authors: Matteo Iacoviello, and Gaston Navarro
From: Federal Reserve Board
Spillovers between US and German Bonds
Curcuru and al. use intraday data on futures prices on 10-year U.S. Treasury and 10-year Bund securities for the period 2005-2017 and find that spillovers from ECB announcements to U.S. Treasury yields are significant. More specifically, they estimate that half of the reaction in German domestic yields spills over to U.S. yields—a magnitude of impact that is nearly identical to that from FOMC announcements to German Bund yields. They conclude:
[…] U.S. monetary policy cannot be conducted in isolation. As the FOMC continues to remove policy accommodation, it will need to take into account the eventual removal of policy accommodation abroad and the impact this will have on U.S Treasury yields and U.S. asset prices in general.
Measuring Monetary Policy Spillovers between U.S. and German Bond Yields
Authors: Stephanie E. Curcuru, Michiel De Pooter, George Eckerd
From: Federal Reserve Board
