{
  "title": "Global Financial Conditions and Monetary Policy Autonomy",
  "publication": "IMF Working Papers, June 8, 2016",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/global-financial-conditions-and-monetary-policy-autonomy-43943",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/31/global-financial-conditions-and-monetary-policy-autonomy-43943",
  "overlayPath": "/en/publications/wp/issues/2016/12/31/global-financial-conditions-and-monetary-policy-autonomy-43943/index.md",
  "summary": "Is the Mundell-Fleming trilemma alive and well? International co-movement of asset prices takes place alongside synchronized business cycles, complicating the identification of financial spillovers and assessments of monetary policy autonomy.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Title: Global Financial Conditions and Monetary Policy Autonomy\n- Authors: Carlos Caceres, Yan Carriere-Swallow, Bertrand Gruss\n- Date: June 8, 2016\n- Research question: Is the Mundell-Fleming trilemma alive and well? The paper examines international co-movement of asset prices alongside synchronized business cycles and implications for identifying financial spillovers and assessing monetary policy autonomy.\n- Core benchmark: Impose the null hypothesis that central banks respond only to the outlook for domestic inflation and output."
    },
    {
      "heading": "Main findings",
      "content": "- Common approaches used to estimate interest rate spillovers tend to understate the degree of monetary autonomy enjoyed by small open economies with flexible exchange rates.\n- After applying an empirical strategy that partials out spillovers associated with impaired monetary autonomy, the authors find more compelling evidence that flexible exchange rates deliver monetary autonomy than prior work has suggested.\n- International co-movement of asset prices occurs alongside synchronized business cycles, which complicates identification of financial spillovers and assessments of monetary policy autonomy."
    },
    {
      "heading": "Methodological contribution",
      "content": "- Proposes an empirical strategy that partials out those spillovers that are associated with impaired monetary autonomy.\n- Uses a benchmark for interest rate comovement based on the null hypothesis that central banks react only to domestic inflation and output outlooks."
    },
    {
      "heading": "Policy implications and interpretation",
      "content": "- Evidence supports the prediction of the Mundell-Fleming trilemma that flexible exchange rates can deliver monetary autonomy, more strongly than suggested by prior literature.\n- Assessments of monetary policy autonomy and interest rate spillovers should account for synchronized business cycles and asset-price co-movement to avoid understating autonomy for small open economies with flexible exchange rates.\n\n---\n\n Content in this bundle\n\n- wp16108 — Global Financial Conditions and Monetary Policy Autonomy\n  - wp16108 — Global Financial Conditions and Monetary Policy Autonomy (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp16108 — Global Financial Conditions and Monetary Policy Autonomy (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/global-financial-conditions-and-monetary-policy-autonomy-43943"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2016/12/31/global-financial-conditions-and-monetary-policy-autonomy-43943/index.md)",
    "[Structured JSON version](/en/publications/wp/issues/2016/12/31/global-financial-conditions-and-monetary-policy-autonomy-43943/index.json)",
    "[Bundle manifest](/en/publications/wp/issues/2016/12/31/global-financial-conditions-and-monetary-policy-autonomy-43943/bundle-manifest.json)",
    "Authors: Carlos Caceres, Yan Carriere-Swallow, Bertrand Gruss",
    "Published: June 8, 2016",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484382066.001",
    "Title: Global Financial Conditions and Monetary Policy Autonomy",
    "Authors: Carlos Caceres, Yan Carriere-Swallow, Bertrand Gruss",
    "Date: June 8, 2016",
    "Research question: Is the Mundell-Fleming trilemma alive and well? The paper examines international co-movement of asset prices alongside synchronized business cycles and implications for identifying financial spillovers and assessing monetary policy autonomy.",
    "Core benchmark: Impose the null hypothesis that central banks respond only to the outlook for domestic inflation and output.",
    "Common approaches used to estimate interest rate spillovers tend to understate the degree of monetary autonomy enjoyed by small open economies with flexible exchange rates.",
    "After applying an empirical strategy that partials out spillovers associated with impaired monetary autonomy, the authors find more compelling evidence that flexible exchange rates deliver monetary autonomy than prior work has suggested.",
    "International co-movement of asset prices occurs alongside synchronized business cycles, which complicates identification of financial spillovers and assessments of monetary policy autonomy.",
    "Proposes an empirical strategy that partials out those spillovers that are associated with impaired monetary autonomy.",
    "Uses a benchmark for interest rate comovement based on the null hypothesis that central banks react only to domestic inflation and output outlooks.",
    "Evidence supports the prediction of the Mundell-Fleming trilemma that flexible exchange rates can deliver monetary autonomy, more strongly than suggested by prior literature.",
    "Assessments of monetary policy autonomy and interest rate spillovers should account for synchronized business cycles and asset-price co-movement to avoid understating autonomy for small open economies with flexible exchange rates.",
    "**_wp16108 — Global Financial Conditions and Monetary Policy Autonomy**"
  ],
  "related": [
    {
      "title": "_wp16108 — Global Financial Conditions and Monetary Policy Autonomy",
      "role": "document",
      "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2016/_wp16108.pdf",
      "summary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2016/_wp16108.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2016/_wp16108.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/wp/issues/2016/12/31/global-financial-conditions-and-monetary-policy-autonomy-43943/index.md",
    "json": "/en/publications/wp/issues/2016/12/31/global-financial-conditions-and-monetary-policy-autonomy-43943/index.json",
    "bundleManifest": "/en/publications/wp/issues/2016/12/31/global-financial-conditions-and-monetary-policy-autonomy-43943/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-17T14:59:40.776Z"
}