NDLI: Exchange Rate Dynamics and Monetary Spillovers with Imperfect Financial Markets

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Exchange Rate Dynamics and Monetary Spillovers with Imperfect Financial Markets

Content Provider	Scilit
Author	Akinci, Ozge Queralto, Albert
Copyright Year	2018
Description	Journal: SSRN Electronic Journal We use a two-country New Keynesian model with financial frictions and dollar debt in balance sheets to investigate the foreign effects of U.S. monetary policy. Financial amplification works through an endogenous deviation from uncovered interest parity (UIP) arising from limits to arbitrage in private intermediation. Combined with dollar trade invoicing, this mechanism leads to large spillovers from U.S. policy, consistent with the evidence. Foreign monetary policies that attempt to stabilize the exchange rate reduce welfare and may exacerbate exchange rate volatility. We document empirically a link between UIP deviations and measures of credit market frictions, as predicted by the model.
Related Links	https://www.federalreserve.gov/econres/ifdp/files/ifdp1254.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3395526
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.3395526
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2018-06-01
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal Financial Frictions U.s. Monetary Policy Spillovers Currency Premium Uncovered Interest Rate Parity Condition
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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