In the last two decades, there has been substantial co-movement of US and Eurozone interest rates. This column shows that the ECB’s unconventional monetary policy has largely succeeded in decoupling nominal interest rates in the Eurozone from those in the US since 2014. This has been especially true for rates of up to five years’ maturity since the rise in US interest rates following the election of Donald Trump.
Benoit Mojon, 04 March 2017
Javier Cravino, Andrei Levchenko, 22 October 2016
Multinational production has become one of the most important means by which firms serve foreign markets. This column examines the role of multinational firms in aggregate business cycle transmission. The results suggest that the combined impact of all foreign multinationals is small but significant, accounting for about 10% of the productivity shocks in a typical country and leading to a somewhat more synchronised international business cycle.
Julian di Giovanni, Andrei Levchenko, Isabelle Méjean, 11 February 2016
The business cycles of countries with greater bilateral trade and multinational production linkages are more closely correlated. But the meaning of this empirical relationship is not well understood. Some contend that these linkages allow for the transmission of shocks across countries, while others argue that countries that trade more with each other are similar in other ways and are thus subject to common shocks. Using data from France, this column examines the properties of international co-movement at the firm level. Even after controlling for common shocks, there is still substantial evidence of transmission of shocks through trade and multinational linkages. Furthermore, trade linkages matter more than multinational ones, especially when it comes to the aggregate impact.