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What Goes around Comes around: How Large Are Spillbacks from US Monetary Policy?

Referierte Aufsätze Web of Science

Max Breitenlechner, Georgios Georgiadis, Ben Schumann

In: Journal of Monetary Economics 131 (2022), S. 45–60


Spillovers from US monetary policy entail spillbacks to the domestic economy. Applying counterfactual analyses in a Bayesian proxy structural vector-autoregressive model we find that spillbacks account for a non-trivial share of the slowdown in domestic real activity following a contractionary US monetary policy shock. Spillbacks materialise as a monetary policy tightening depresses foreign sales and valuations of US firms so that Tobin’s /cash flow and stock market wealth effects impinge on investment and consumption. Net trade does not contribute to spillbacks because US monetary policy affects exports and imports similarly. Geographically, spillbacks materialise through advanced rather than emerging market economies.

Ben Schumann

Ph.D. Student in the Macroeconomics Department

JEL-Classification: F42;E52;C50
Keywords: US monetary policy, spillovers, spillbacks, Bayesian proxy structural VAR models

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