International Channels of Transmission of Monetary Policy and the Mundellian Trilemma

44 Pages Posted: 12 Jan 2016

See all articles by Hélène Rey

Hélène Rey

London Business School; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

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Date Written: December 2015

Abstract

This lecture argues that the Global Financial Cycle is a challenge for the validity of the Mundellian trilemma. I present evidence that US monetary policy shocks are transmitted internationally and affect financial conditions even in inflation targeting economies with large financial markets. Hence flexible exchange rates are not enough to guarantee monetary autonomy in a world of large capital flows.

Keywords: Global Financial Cycle, Monetary Policy, Trilemma

JEL Classification: F33, F41, F42

Suggested Citation

Rey, Helene, International Channels of Transmission of Monetary Policy and the Mundellian Trilemma (December 2015). CEPR Discussion Paper No. DP11027, Available at SSRN: https://ssrn.com/abstract=2714267

Helene Rey (Contact Author)

London Business School ( email )

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Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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