ECB and U.S Monetary Policy Spillovers to Sweden: : Transmissions Channels and the Effects of Central Bank Information Bias/Unconventional Monetary Policy

Sammanfattning: This paper revisits the transmission of ECB and U.S Fed monetary policy to Sweden by usingrecently developed measures of ECB and Fed monetary policy shocks, corrected for the centralbank information element. To analyze the spillovers of foreign monetary policy to Sweden Irely on the Local Projections methodology. First, I show that standard measures of foreignmonetary policy shocks that are known to contain a central bank information element can causecounterintuitive spillover effects to Swedish macroeconomic and financial variables. Second,my results suggest that monetary policy spillovers from the ECB and U.S Fed both havesubstantial impact on the Swedish economy, particularly through the aggregate demandchannel. While an ECB monetary contraction has a strong negative impact on Swedishmacroeconomic variables, the tightening of the U.S Fed monetary policy mostly exhibits an expansionary effect. Lastly, but crucially, my thesis demonstrates that US monetary policy has more substantial spillovers during the conventional monetary policy period, as the aggregatedemand channel is muted during periods of unconventional monetary policy.