International Channels of Transmission of Monetary Policy and the Mundellian Trilemma

This lecture argues that the Global Financial Cycle is a challenge for the validity of the Mundellian trilemma. The paper presents evidence that U.S. monetary policy shocks are transmitted internationally and affect financial conditions even in inflation-targeting economies with large financial mark...

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Bibliographic Details
Published in:IMF economic review 2016-04, Vol.64 (1), p.6-35
Main Author: REY, HÉLÈNE
Format: Article
Language:English
Subjects:
Balance sheets
Capital Markets
Costs
Economic aspects
Economic Policy
Economics
Economics and Finance
Effects
Evaluation
Expenditures
Financial markets
Fixed exchange rates
Floating exchange rates
Forecasts and trends
Foreign exchange rates
Inflation
Interest rates
International
International Economics
International finance
Macroeconomics
Macroeconomics/Monetary Economics//Financial Economics
Markets
Monetary policy
Risk premiums
Securities markets
Statistical analysis
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Description
Summary:This lecture argues that the Global Financial Cycle is a challenge for the validity of the Mundellian trilemma. The paper presents evidence that U.S. monetary policy shocks are transmitted internationally and affect financial conditions even in inflation-targeting economies with large financial markets. Hence flexible exchange rates are not enough to guarantee monetary autonomy in a world of large capital flows.
ISSN:2041-4161
2041-417X
DOI:10.1057/imfer.2016.4