Global impact of US and euro area unconventional monetary policies: a comparison

BIS Working Papers No 610
February 2017

The paper analyses and compares the domestic and cross-border effects of US and euro area unconventional monetary policy measures on 24 major advanced and emerging economies, based on an estimated global vector error-correction model (GVECM). Unconventional monetary policies are measured using shadow interest rates developed by Lombardi and Zhu (2014). Monetary policy shocks are identified using sign restrictions. The GVECM impulse responses suggest that US unconventional monetary policy generally has stronger domestic and cross-border impacts than euro area non-standard measures. Its spillovers to other economies are estimated to be more sizeable and persistent, especially in terms of output growth and inflation. There is evidence of diverse responses in the emerging economies in terms of exchange rate pressures, credit growth as well as monetary policy. In addition, the strength of cross-border transmission channels to the emerging economies appears to differ for US and euro area policies.

JEL classification: E43, E44, E52, F42, F47

Keywords: unconventional monetary policy; quantitative easing; shadow interest rate; spillover; global vector error correction model (GVECM)