Discussion Paper Details

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Title: Monetary Policy in the Capitals of Capital

Author(s): Elena Gerko and Hélène Rey

Publication Date: August 2017

Keyword(s): high frequency identification, international financial spillovers and monetary policy

Programme Area(s): Financial Economics, International Macroeconomics and Finance and Monetary Economics and Fluctuations

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 effects of the policy rate and of forward guidance, broadly defined. We also analyse international financial spillovers, which we find to be asymmetric.

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Bibliographic Reference

Gerko, E and Rey, H. 2017. 'Monetary Policy in the Capitals of Capital'. London, Centre for Economic Policy Research.