## U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data

_IMF Working Papers, September 16, 2022_

## Source details

**Canonical URL:** [U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data](https://www.imf.org/en/publications/wp/issues/2022/09/16/u-s-523572)

## Other formats

- [Markdown version](/en/publications/wp/issues/2022/09/16/u-s-523572/index.md)
- [Structured JSON version](/en/publications/wp/issues/2022/09/16/u-s-523572/index.json)
- [Bundle manifest](/en/publications/wp/issues/2022/09/16/u-s-523572/bundle-manifest.json)

## Bibliographic details
- Authors: Elif C Arbatli Saxegaard, Melih Firat, Davide Furceri, Jeanne Verrier
- Published: September 16, 2022
- Series: IMF Working Papers

---

### Key research question and scope
- Objective: Examine three main channels through which U.S. monetary policy shocks affect firm investment in foreign countries.
- Channels studied:
  - The balance sheet channel.
  - The financial channel of the exchange rate.
  - The trade channel.
- Data: Quarterly firm-level data for 63 advanced economies (AEs) and emerging market and developing economies (EMDEs) over 1996-2016.
- Authors: Elif C Arbatli Saxegaard, Melih Firat, Davide Furceri, Jeanne Verrier.
- Date: September 16, 2022.
- Publication series: Working Paper No. 2022/191; Pages: 69; ISBN: 9798400219948; ISSN: 1018-5941.

### Main findings
- All three channels—balance sheet, financial channel of the exchange rate, and trade—play an important and independent role in transmitting U.S. monetary policy shocks to firm investment abroad.
- Balance sheet channel:
  - U.S. monetary policy shocks have larger effects on investment for firms that are more leveraged.
  - Back-of-the-envelope calculations suggest the balance sheet channel is the most important channel of transmission of U.S. monetary policy shocks on aggregate firm investment.
- Financial channel of the exchange rate:
  - Firms with a higher share of debt in foreign currency experience larger investment effects from U.S. monetary policy shocks.
- Trade channel:
  - Firms operating in sectors with higher export dependence experience larger investment effects from U.S. monetary policy shocks.
- Heterogeneity: Firm-level characteristics (leverage, share of foreign-currency debt, sectoral export dependence) significantly condition the size of spillovers.

### Methodology and coverage
- Empirical approach: Analysis based on quarterly firm-level data across 63 AEs and EMDEs for the period 1996-2016.
- Scope emphasizes firm heterogeneity and cross-border spillovers from U.S. monetary policy shocks.

### Implications
- Policy relevance:
  - Macroeconomic effects of U.S. monetary policy extend to foreign firm investment through multiple, distinct channels.
  - Financial vulnerabilities at the firm level—especially leverage and foreign-currency debt exposure—magnify the impact of U.S. monetary policy shocks on investment.
  - Trade exposure further amplifies spillovers for export-dependent sectors.
- Aggregate impact:
  - The balance sheet channel is likely the dominant mechanism for aggregate firm investment responses to U.S. monetary policy shocks (per authors’ back-of-the-envelope calculations).

*U.S. Monetary Policy Shock Spillovers: Evidence from Firm-Level Data, Elif C Arbatli Saxegaard, Melih Firat, Davide Furceri, and Jeanne Verrier, Working Paper No. 2022/191, September 16, 2022.*

---

## Content in this bundle

- **Working Paper**
  - [Working Paper (Markdown version)](/-/media/files/publications/wp/2022/english/wpiea2022191-print-pdf.pdf.md){rel="alternate" type="text/markdown"}
  - [Working Paper (PDF)](/-/media/files/publications/wp/2022/english/wpiea2022191-print-pdf.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2022/09/16/u-s-523572_