2024 European Winter Meeting, Palma de Majorca, Spain: December, 2024
The International Spillover of Monetary Policy Shock: New Evidence from Nighttime Light
Kaiji Chen, Qichao Wang, Juanyi Xu, Jingbo Yao
We revisit the spillover effects of US monetary policy shocks using a new data source, the daily nighttime light (NTL), as a high-frequency proxy for real economic activities. Taking China as an example, the unexpected US tightening dampens its output, and the peak comes about two months later. This is explained by a construction channel, with the NTL variation mainly driven by non-built-up areas instead of city centers and suburbs. Consistently, cities with lower urbanization rates and tighter financial conditions respond more negatively. Moreover, the US shock also drives output fluctuation in other economies, especially emerging countries or regions.
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