Discussion paper

DP16485 A Tale of Two Global Monetary Policies

We compare the macroeconomic and financial spillovers of the unconventional monetary policies of the Fed and the ECB. Monetary policy tightenings in the two areas are followed by a contraction in global activity and trade, a retrenchment in global capital flows, a fall in global stock markets, and a rise in risk aversion. Bilateral spillovers are also powerful. Fed and ECB monetary policies propagate internationally through the same channels { trade and risk-taking {, but the magnitude of ECB spillovers is smaller. We postulate that the relative importance of the euro and the US dollar in the international financial system can help to explain such asymmetries, and produce tentative evidence that links the strength of the ECB spillovers to € exposure in trade invoicing and the pricing of financial transactions.


Miranda-Agrippino, S and T Nenova (2022), ‘DP16485 A Tale of Two Global Monetary Policies‘, CEPR Discussion Paper No. 16485. CEPR Press, Paris & London. https://cepr.org/publications/dp16485