International Monetary Policy Spillovers between the Federal Reserve and the Bank of Japan: Evidence from a Bayesian Proxy SVAR

Details

Supervisors

Monti, Francesca

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale, à finalité spécialisée

Abstract

enThis study examines the cross-border transmission of monetary policy between the United States and Japan, with a particular focus on the asymmetry of spillovers between the two economies. Using monthly macrofinancial data and high-frequency monetary policy surprises as external instruments, we estimate a Bayesian Structural Vector Autoregression with external instruments (BSVAR-IV). Monetary policy shocks are normalized to a 25-basis-point increase in each country’s one-year yield, allowing the domestic and cross-border transmission to be characterized within a common empirical framework. The results reveal a substantial asymmetry in the international transmission of monetary policy shocks. US monetary policy spillovers to Japan operate mainly through financial conditions, with contractionary US shocks associated with a reduction of the credit and term spreads, while Japanese monetary policy produces a strong response in US long-term government yields. These findings highlight the importance of financial channels in the international transmission of monetary policy and show how the direction and magnitude of these spillovers depend on the role of each economy in global financial markets.