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Monetary Policy in the Capitals of Capital

Gerko, E, Rey, H
Date Published: 02/08/2017
Journal of the European Economic Association, Volume 15, Issue 4, 1 August 2017, Pages 721–745

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.



Citation:
Elena Gerko, Hélène Rey; Monetary Policy in the Capitals of Capital, Journal of the European Economic Association, Volume 15, Issue 4, 1 August 2017, Pages 721–745, https://doi.org/10.1093/jeea/jvx022
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Helene Rey thanks the ERC for financial support (ERC Advanced Grant 695722)




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