| Popis: |
We study the international transmission of shocks to global financial conditions on macroeconomic tail risks in advanced and emerging economies. We show that contractionary financial and monetary policy shocks originating in the U.S. cause elevated downside risks to growth around the world. By tightening financial conditions globally, these shocks affect the left tail of the conditional output growth distribution disproportionately. This effect is particularly pronounced for countries with less flexible exchange rate arrangements, higher foreign currency exposures, and higher levels of private sector leverage. This suggests that policymakers face a trilemma, in which the exchange rate regime and macroprudential policies matter for downside risks to growth. |
