U.S. Monetary Policy Spillovers to Middle East and Central Asia: Shocks, Fundamentals, and Propagations
IMF Working Papers, January 19, 2024
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- U.S. Monetary Policy Spillovers to Middle East and Central Asia: Shocks, Fundamentals, and Propagations
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Bibliographic details
- Authors: Giovanni Ugazio, Weining Xin
- Published: January 19, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400263101.001
Research question and methods
- Decompose U.S. interest rate changes into two orthogonal shocks: the pure monetary policy shock and the information news shock.
- Empirical analysis uses a sample of 16 ME & CA countries.
Key findings
- When U.S. interest rates increase, the two orthogonal shocks have opposite spillovers on the ME & CA region:
- Tightening driven by contractionary monetary policy shocks hinders growth.
- Tightening driven by positive information news shocks boosts growth despite higher interest rates.
- Countries with weaker fundamentals:
- Face more negative spillovers from contractionary monetary policy shocks.
- May sometimes benefit more from positive information news shocks.
- Interaction with oil prices and global risk appetite:
- High oil prices mitigate both spillovers for oil exporters.
- Global risk appetite amplifies both spillovers.
- Heterogeneity in the 2022 U.S. tightening cycle impact:
- Oil exporters with stronger fundamentals withstood the shock well.
- Oil importers with weaker fundamentals were hit the most.
Subject areas and keywords
- Subject: External debt, Financial sector policy and analysis, International trade, Monetary policy, Monetary tightening, Oil exports, Oil prices, Prices, Spillovers
- Keywords: fundamentals, Global, information news shock, Middle East and Central Asia, monetary policy shock, monetary policy spillover, Monetary tightening, Oil exports, oil prices, spillovers, spillovers to Middle East, summary statistics table, U.S. monetary policy
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