Economics, Econometrics and Finance
4 years ago

Global financial chaos looms as US monetary policy tightens.

The Review of Economic Studies
U.S. Monetary Policy and the Global Financial Cycle
Silvia Miranda‐Agrippino, Hélène Rey

Paper Summary

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US monetary policy changes affect global financial markets by causing fluctuations in risky asset prices worldwide. When the US tightens its monetary policy, it leads to reduced global financial activity, less credit available globally, decreased international lending, and stricter foreign financial conditions. Countries with floating exchange rates are also impacted by these changes.