What goes around comes around: How large are spillbacks from US monetary policy?

Spillovers from US monetary policy entail spillbacks to the domestic economy. Applying counterfactual analyses in a Bayesian proxy structural vector-autoregressive model we find that spillbacks account for a non-trivial share of the slowdown in domestic real activity following a contractionary US monetary policy shock. Spillbacks materialise as a mone-tary policy tightening depresses foreign sales and valuations of US firms so that Tobin's q/cash flow and stock market wealth effects impinge on investment and consumption. Net trade does not contribute to spillbacks because US monetary policy affects exports and im-ports similarly. Geographically, spillbacks materialise through advanced rather than emerg-ing market economies.(c) 2022 Elsevier B.V. All rights reserved.