F4 - Macroeconomic Aspects of International Trade and Finance

• Fiscal Policy in the Age of COVID-19: Does It “Get in All of the Cracks”?

  Staff Working Paper 2022-45 Pierre-Olivier Gourinchas, Şebnem Kalemli-Özcan, Veronika Penciakova, Nicholas Sander

  The COVID-19 pandemic has caused an atypical recession in which some sectors of the economy boomed and others collapsed. This required a unique fiscal policy reaction to both support firms and stimulate activity in sectors with slack. Was fiscal policy able to get where it was needed? Mostly, yes.

  Content Type(s): Staff research, Staff working papers Topic(s): Coronavirus disease (COVID-19), Firm dynamics, Fiscal policy, International topics JEL Code(s): D, D5, D57, E, E6, E62, F, F4, F41

• International Transmission of Quantitative Easing Policies: Evidence from Canada

  Staff Working Paper 2022-30 Serdar Kabaca, Kerem Tuzcuoglu

  This paper examines the cross-border spillovers from major economies’ quantitative easing (QE) policies to their trading partners. We concentrate on spillovers from the US to Canada during the zero lower bound period when QE policies were actively used.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, International topics, Monetary policy transmission JEL Code(s): E, E5, E52, F, F4, F41, F44

• Foreign Exchange Interventions: The Long and the Short of It

  Staff Working Paper 2022-25 Patrick Alexander, Sami Alpanda, Serdar Kabaca

  This paper studies the effects of foreign exchange (FX) interventions in a two-region model where governments issue both short- and long-term bonds. We find that the term premium channel dominates the trade balance channel in our calibrated model. As a result, the conventional beggar-thy-neighbor effects of interventions are overturned.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Exchange rate regimes, Exchange rates, Foreign reserves management, International financial markets, International topics JEL Code(s): F, F3, F31, F33, F4, F41

• Exports and the Exchange Rate: A General Equilibrium Perspective

  Staff Working Paper 2022-18 Patrick Alexander, Abeer Reza

  How do a country’s exports change when its currency depreciates? Does it matter which forces drive the exchange rate deprecation in the first place? We find that this relationship varies greatly depending on what drives exchange rate movements, and we conclude that the direct relationship between the exchange rate and exports is weak for Canada.

  Content Type(s): Staff research, Staff working papers Topic(s): Balance of payments and components, Business fluctuations and cycles, Exchange rate regimes, Exchange rates, International topics, Monetary policy transmission, Trade integration JEL Code(s): F, F3, F31, F32, F33, F4, F41

• Monetary Policy and Redistribution in Open Economies

  Staff Working Paper 2022-6 Xing Guo, Pablo Ottonello, Diego Perez

  We study how different types of monetary policy shape the distributional effects of external economic shocks on households’ consumption in a small open economy. Our results present a trade-off between maintaining overall stabilization and controlling consumption inequality.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rate regimes, Monetary policy JEL Code(s): E, E3, E32, E5, E52, F, F4, F41, F44

• On the Wedge Between the PPI and CPI Inflation Indicators

  Staff Working Paper 2022-5 Shang-Jin Wei, Yinxi Xie

  We find that the CPI and PPI inflation indexes co-moved strongly throughout the late 20th century, but their correlation has fallen substantially since the early 2000s. We offer a structural explanation for this divergence based on the growth of global supply chains since 2000. This finding offers a unique perspective for the future design of optimal monetary policy.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, Inflation targets, International topics, Monetary policy JEL Code(s): E, E3, E31, E5, E52, E58, F, F1, F11, F12, F4, F41, F6, F62

• News-Driven International Credit Cycles

  Staff Working Paper 2021-66 Galip Kemal Ozhan

  This paper examines the implications of positive news about future asset values that turn out to be incorrect at a later date in an open economy model with banking. The model captures the patterns of bank credit and current account dynamics in Spain between 2000 and 2010. The model finds that the use of unconventional policies leads to a milder bust.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Economic models, Financial stability, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): E, E4, E44, F, F3, F32, F4, F41, G, G1, G15, G2, G21

• Monetary Policy Spillover to Small Open Economies: Is the Transmission Different under Low Interest Rates?

  Staff Working Paper 2021-62 Jin Cao, Valeriya Dinger, Tomás Gómez, Zuzana Gric, Martin Hodula, Alejandro Jara, Ragnar Juelsrud, Karolis Liaudinskas, Simona Malovaná, Yaz Terajima

  Does the transmission of monetary policy change when interest rates are low or negative? We shed light on this question by analyzing the international bank lending channels of monetary policy using regulatory data on banks from four small open economies: Canada, Chile, the Czech Republic and Norway.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, International topics, Monetary policy transmission JEL Code(s): E, E4, E43, E5, E52, E58, F, F3, F34, F4, F42, G, G2, G21, G28

• Fiscal Spillovers: The Case of US Corporate and Personal Income Taxes

  Staff Working Paper 2021-41 Madeline Hanson, Daniela Hauser, Romanos Priftis

  How do changes to personal and corporate income tax rates in the United States affect its trading partners? Spillover effects from cuts in the two taxes differ. They are generally small and negative for corporate taxes, but sizable and positive for personal income taxes.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Exchange rate regimes, Fiscal policy, International topics JEL Code(s): E, E3, E32, E6, E62, F, F4, F44, H, H2, H20

• The Anatomy of Sentiment-Driven Fluctuations

  Staff Working Paper 2021-33 Sushant Acharya, Jess Benhabib, Zhen Huo

  We show that changes in sentiment that aren’t related to fundamentals can drive persistent macroeconomic fluctuations even when all economic agents are rational. Changes in sentiment can also affect how fundamental shocks affect macroeconomic outcomes.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E2, E20, E3, E32, F, F4, F44