What goes around comes around: How large are spillbacks from US monetary policy?

Breitenlechner, Max; Georgiadis, Georgios; Schumann, Ben

doi:10.1016/j.jmoneco.2022.07.001

Cited by 17 publications

(5 citation statements)

References 44 publications

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“…Nevertheless, our results point to the importance of taking into account the effects of monetary policy on commodity prices. Complementing the results in Breitenlechner, Georgiadis, and Schumann (2022) and Ider, Kriwoluzky, Kurcz, and Schumann (2023), we document that US and ECB monetary policy transmission channels greatly hinge on how different commodities react and then affect domestic and international inflation.…”

Section: Introductionsupporting

confidence: 64%

“…But, how quantitatively important is the commodity price channel of monetary policy-especially US monetary policy-in driving inflation in the US and worldwide? Empirical analysis of this question has been limited (Breitenlechner et al, 2022;Ider et al, 2023). This paper contributes to filling this gap by estimating the effects of monetary policy shocks on a variety of commodity prices and, through this channel, their spillback to the domestic economy and spillovers to consumer prices in other countries.…”

Section: Introductionmentioning

confidence: 99%

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Monetary Policy Transmission through Commodity Prices

Miranda-Pinto

2023

IMF Working Papers

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Monetary policy influences inflation dynamics by exerting impact on a diverse array of commodity prices. At high frequencies, we show that a 10 basis points increase in US monetary policy rate reduces commodity prices between 0.5% and 2.5%, after 18 to 24 business days. Beyond the dollar appreciation channel, the effects are larger for highly storable and industrial commodities, consistent with the cost of carry and the expected demand channel. We then study the quantitative importance of the commodity-price channel of monetary policy on domestic and international inflation at longer horizons (6-36 months). The results indicate that the response of commodity prices-oil, base metals, and food prices-to monetary policy accounts for 47% of the total effect of US monetary policy on US headline inflation, and 57% of the effect of US monetary policy on other countries' headline inflation. The commodity price channel on core inflation is smaller and mainly driven by base metal prices. Finally, the commodity-price channel of ECB monetary policy is smaller, and it mainly operates through its effect on energy prices.

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Section: Introductionsupporting

confidence: 64%

Section: Introductionmentioning

confidence: 99%

Monetary Policy Transmission through Commodity Prices

Miranda-Pinto

2023

IMF Working Papers

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“…We present evidence of two distinct types of spillovers. The first type, driven by pure policy shocks, aligns with the conventional spillovers discussed earlier: a tightening shock broadly leads to asset prices decreases in EMEs (see Dedola, Rivolta, and Stracca (2017) or Breitenlechner, Georgiadis, and Schumann (2022) for example). In this case, assuming market participants possess the same information as the Federal Reserve regarding the macroeconomic situation, observed spillovers occur as a result of the Fed's deviation from its policy rule.…”

Section: Introductionsupporting

confidence: 53%

Information Shocks in the U.S. and Asset Mispricing in Emerging Economies

Lopez-Villavicencio,

Pourroy

2023

Preprint

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“…Although our findings are based on empirical evidence for the euro area economy, our first contribution theoretically holds for any economy that is not a SOE in the global markets (as shown for the US economy), and our second contribution theoretically applies to any economy that is not a SOE with a currency other than the US dollar. Moreover, this paper contributes to the literature on the spillovers of US monetary policy (Georgiadis, 2016;Dedola, Rivolta, and Stracca, 2017;Breitenlechner, Georgiadis, and Schumann, 2022;Degasperi, Hong, and Ricco, 2023) by quantifying, through counterfactual scenarios, the importance of the energyprice channel for the transmission of US monetary policy spillovers to the euro area inflation dynamics.…”

Section: Introductionmentioning

confidence: 91%