Increased international trade and financial globalisation have increased interdependence between the world's economies and made them more vulnerable to international shocks. Financial globalisation also has an impact on the transmission mechanism of monetary policy, where foreign monetary policy can be perceived as either beneficial or detrimental. It is detrimental, for example, whenever the central bank of a large open economy like the United States' Federal Reserve, or Fed, tightens monetary policy.
Key learning objectives:
Understand how Fed tightening leads to a reduction in the Euro Area’s GDP
Understand the impact of ECB monetary policy on the US economy
Post-COVID Exogenous and Endogenous ECB Monetary Policy II
Corrado Macchiarelli • 07:28