External dimension of monetary policy

Remarks by Mr Hyun Song Shin, Economic Adviser and Head of Research of the BIS, at the Board of Governors of the Federal Reserve System conference "Monetary policy implementation and transmission in the post-crisis period", Washington, DC, 13 November 2015.

International spillovers and spillbacks are not a recent phenomenon. They result from past monetary policy actions. Due to the "triple coincidence" accounting convention - whereby the GDP area, decision-making unit and currency area are assumed to be one and the same - policymakers missed massive build-ups in borrowing in the past. While the protagonists have changed (dollar borrowers are emerging market corporates rather than European banks, and the borrowing is done through corporate bonds rather than wholesale bank funding), the same mechanisms are at work today. Even if monetary policy cooperation is limited by domestic central bank mandates, enlightened self-interest should be enough motivation to take account of spillovers and spillbacks.