We provide a theory of the limits to monetary policy independence in open economies arising from the interaction between capital flows and domestic collateral constraints. The key feature of our theory is the existence of an 'Expansionary Lower Bound' (ELB), defined as an interest rate threshold...

This paper estimates a small open economy model for Egypt to analyze inflation, output dynamics and monetary policy during 2005-2010. The interest rate channel is found to be relatively weak in Egypt, complicating the use of interest rates as the immediate target of monetary policy. However, the...

How does domestic monetary policy in systemic countries spillover to the rest of the world? This paper examines the transmission channel of domestic monetary policy in the cross-border context. We use exogenous shocks to monetary policy in systemically important economies, including the U.S.,...

This paper provides empirical evidence that the size of the spillovers from U.S. monetary policy to non-oil GDP growth in the GCC countries depends on the level of oil prices. The potential channels through which oil prices could affect the effectiveness of monetary policy are discussed. We find...

Monetary policy entails demand augmenting and demand diverting effects, with its impact on the trade balance-and spillovers to other countries-depending on the relative magnitude of these opposing effects. Using US data, and a sign-restricted structural VAR identification strategy, we...

We develop a theoretical model that shows that in the near future, the monetary policies of some key central banks in advanced economies (AEs) will have two dimensions-changes in short-term policy rates and balance sheet adjustments. This will affect emerging market economies (EMs), especially...