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Monetary policy in the capitals of capital

Journal

Journal of the European Economic Association

Subject

Economics

Publishing details

Journal of the European Economic Association 2017 Vol 15:4 p 721-745

Authors / Editors

Gerko E;Rey H

Biographies

Helene Rey

Publication Year

2017

Abstract

The importance of financial markets and international capital flows has increased greatly since the 1990s. How does this affect the effectiveness of monetary policy? We analyse the transmission of monetary policy in two important financial centres, the United States and the United Kingdom. Studying the responses of mortgage and corporate spreads, we find evidence in favour of an important financial channel in both countries. Our identification strategy allows us to study the effect of movements in the policy instruments and forward guidance, broadly defined. We also analyse international financial spillovers, which we find to be asymmetric.

Keywords

Financial markets; Capital flows; Monetary policy

Project Funder

ERC Advanced Grant

Available on ECCH

No


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