A tale of two global monetary policies

We compare the macroeconomic and financial spillovers of the unconventional monetary pol-icies of the Fed and the ECB. Monetary policy tightenings in the two areas are followed by a contraction in global activity and trade, a retrenchment in global capital flows, a fall in global stock markets, and a rise in risk aversion. Bilateral spillovers in both directions are also power-ful. We find that Fed and ECB monetary policies propagate internationally through the same channels - trade and risk-taking. While the magnitude of ECB spillovers to global aggregates is smaller, proxies for global risk aversion respond in the same way and to the same degree to ECB and Fed unconventional monetary policy shocks, pointing to an equally powerful risk -taking channel for their international transmission that operates through global financial mar-kets. Spillovers of the unconventional policies of the two central banks to international asset prices are equivalent to a very large extent.(c) 2022 The Bank of England. Published by Elsevier B.V. This is an open access article under theCC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).