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Monetary Policy in the Capitals of Capital

Elena Gerko, Hélène Rey

NBER Working Paper No. 23651
Issued in August 2017
NBER Program(s):Asset Pricing, International Finance and Macroeconomics, Monetary Economics

The importance of financial markets and international capital flows have 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 movements in the policy rates and the effect of forward guidance, broadly defined. We also analyse international financial spillovers, which we find to be asymmetric.

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Document Object Identifier (DOI): 10.3386/w23651

Published: Elena Gerko & Hélène Rey, 2017. "Monetary Policy in the Capitals of Capital," Journal of the European Economic Association, vol 15(4), pages 721-745. citation courtesy of

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