Global Impact of US and Euro Area Unconventional Monetary Policies: A Comparison

44 Pages Posted: 8 Feb 2017  

Qianying Chen

International Monetary Fund (IMF) - Monetary and Capital Markets Department

Marco J. Lombardi

Bank for International Settlements (BIS) - Monetary and Economic Department

Alex Ross

University of Cambridge

Feng Zhu

Bank for International Settlements (BIS)

Date Written: February 2017

Abstract

The paper analyses and compares the domestic and cross-border effects of US and euro area unconventional monetary policy measures on 24 major advanced and emerging economies, based on an estimated global vector error-correction model (GVECM). Unconventional monetary policies are measured using shadow interest rates developed by Lombardi and Zhu (2014). Monetary policy shocks are identified using sign restrictions. The GVECM impulse responses suggest that US unconventional monetary policy generally has stronger domestic and cross-border impacts than euro area non-standard measures. Its spillovers to other economies are estimated to be more sizeable and persistent, especially in terms of output growth and inflation. There is evidence of diverse responses in the emerging economies in terms of exchange rate pressures, credit growth as well as monetary policy. In addition, the strength of cross-border transmission channels to the emerging economies appears to differ for US and euro area policies.

Keywords: unconventional monetary policy; quantitative easing; shadow interest rate; spillover; global vector error correction model (GVECM)

JEL Classification: E43, E44, E52, F42, F47

Suggested Citation

Chen, Qianying and Lombardi, Marco J. and Ross, Alex and Zhu, Feng, Global Impact of US and Euro Area Unconventional Monetary Policies: A Comparison (February 2017). BIS Working Paper No. 610. Available at SSRN: https://ssrn.com/abstract=2913259

Qianying Chen (Contact Author)

International Monetary Fund (IMF) - Monetary and Capital Markets Department ( email )

United States
1-202-623-6633 (Phone)

Marco Jacopo Lombardi

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland
+41612809492 (Phone)

Alex Ross

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Feng Zhu

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland
+41 61 280 9158 (Phone)
+41 61 280 9100 (Fax)

HOME PAGE: http://pantheon.yale.edu/~fz9

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