A Tale of Two Global Monetary Policies

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We compare the international financial spillovers of the unconventional monetary policies of the Fed and the ECB. The global reach of US monetary policy is preserved when switching from conventional Fed Funds Rate policies to tools that instead act primarily on the medium and long end of the yield curve. A US monetary policy contraction is still followed by a global retrenchment in capital flows, a fall in global stock markets, and a rise in global risk measures. But ECB unconventional policies too elicit similar effects on global asset markets and financial aggregates worldwide. While with smaller magnitudes, the international financial spillovers of ECB policies are comparable to those of the Fed. And more prominent for non-EA countries that choose the euro as the primary currency for trade invoicing.