Global Spillovers and Domestic Monetary Policy

56 Pages Posted: 27 Feb 2014

See all articles by Menzie David Chinn

Menzie David Chinn

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 2013

Abstract

I discuss how the unconventional monetary policy measures implemented over the past several years - quantitative and credit easing, and forward guidance - can be analysed in the context of conventional models of asset prices, with particular reference to exchange rates. I then discuss alternative approaches to interpreting the effects of such policies, and review the empirical evidence. Finally, I examine the ramifications for thinking about the impact on exchange rates and asset prices of emerging market economies. I conclude that although the implementation of unconventional monetary policy measures may introduce more volatility into global markets, in general it will support global rebalancing by encouraging the revaluation of emerging market currencies.

Keywords: balance sheet, money supply, portfolio balance, forward guidance, yield curve, spreads, signaling, capital flows, rebalancing

JEL Classification: E58, F42

Suggested Citation

Chinn, Menzie David, Global Spillovers and Domestic Monetary Policy (December 2013). BIS Working Paper No. 436, Available at SSRN: https://ssrn.com/abstract=2384451

Menzie David Chinn (Contact Author)

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics ( email )

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Madison, WI 53706-1393
United States
608-262-7397 (Phone)
608-262-2033 (Fax)

National Bureau of Economic Research (NBER)

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United States

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