Making waves – Fed spillovers are stronger and more encompassing than the ECB spillovers

Markets know that Fed policy matters more than any other global central bank. In some countries. Fed policy would matter more even compared to their own central bank policy.

Michele Ca’ Zorzi, Luca Dedola, Georgios Georgiadis, Marek Jarociński, Livio Stracca and Georg Strasser in this ECB research:

This article argues that European Central Bank (ECB) and Federal Reserve System (Fed) monetary policy spill over to other countries asymmetrically. At the bilateral level, the Fed’s impact on the euro area is material to firms’ financial conditions and economic activity. Conversely, the impact of the ECB’s actions on the US economy is minimal. On a global scale, both central banks’ monetary policies matter for other countries, but the Fed’s monetary policy has a more sizeable impact, particularly on foreign financial variables, such as corporate bond spreads.

 

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