U.S. MONETARY POLICY SPILLOVERS ON BRICS COUNTRIES

Abstract

This study examines the spillover effects of U.S. monetary policy on BRICS economies during the current decade starting from May 2005 to February 2016. The study uses the VAR model for data analysis and the change in Federal Reserve balance sheet as the proxy of the U.S. monetary actions. The overall results show that U.S. monetary policy has influenced on BRICS’ outputs, policy rates, real effective exchange rates, trade balances and treasury yields but it has not influenced on inflation. The extent to which BRICS macro-variable responding to U.S. monetary policy varies across countries. In addition, Trade is a significant transmission channel of U.S. monetary policy spill over to BRICS outputs while interest rate seems to play less significant role due to the transmission channel of the shock during the crisis.