Spillover effects of monetary policy and information shocks

Abstract

Central bank announcements convey monetary policy actions and the bank’s assessment of the economic outlook. By analyzing the monetary and information shocks from the Federal Reserve (Fed) and the European Central Bank (ECB), we find that the information shocks from the ECB and Fed, in addition to the monetary policy shocks from both central banks, contribute to the comovement of interest rates in many countries. Our findings underscore the role played by business cycle comovements, foreign exchange dynamics, and financial openness as transmission channels for monetary policy shocks and information shocks.

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