To What Degree and through Which Channel Do Central Banks Other Than the Federal Reserve Cause Spillovers?
The standard view in the literature is that the Federal Reserve is the primary source of monetary policy spillovers; only a limited amount of research studies whether or to what extent other central banks cause spillovers. If, however, other central banks also cause large spillovers, the literature may significantly understate the magnitude of the spillovers affecting the Federal Reserve. In addition, if monetary policy changes at other central banks cause large spillovers into US interest rates, US policymakers may need to take into account these direct spillovers as well as indirect “spillbacks” into the United States through the global business cycle. This paper investigates whether central banks other than the Federal Reserve cause monetary policy spillovers and through which channel they might do so. It studies the spillovers from 20 central banks, using a high-frequency identification approach that looks at the intraday movement of interest rates in source and recipient countries around monetary policy announcements in each source country.