Abstract
We show that US monetary policy is transmitted internationally through the factor structure of exchange rates. Following an easing of monetary policy, investment funds sell safe and buy risky currencies. Global US banks, similarly, tilt their distribution of foreign loan origination toward currencies with greater systematic currency risk. The effects of monetary policy on currency flows and loans persist for several months and feed into the leverage and real investment decisions of firms and, in particular, those that operate using a high-risk currency. We conclude that the risk factor exposure of currencies is a significant channel through which we can understand the international transmission of US monetary policy.
| Original language | English (US) |
|---|---|
| Article number | 104305 |
| Journal | Journal of Financial Economics |
| Volume | 182 |
| DOIs | |
| State | Published - Aug 2026 |
Bibliographical note
Publisher Copyright:© 2026 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license. http://creativecommons.org/licenses/by/4.0/
Keywords
- Currency flows
- Exchange rate factor structure
- F31
- G12
- G15
- Monetary policy
- US dollar
Fingerprint
Dive into the research topics of 'Monetary policy transmission through the exchange rate factor structure'. Together they form a unique fingerprint.Cite this
- APA
- Standard
- Harvard
- Vancouver
- Author
- BIBTEX
- RIS