The international environment is now much more deeply integrated; portfolio substitution by global asset managers acts as a powerful additional mechanism for transmitting financial shocks across monetary areas. Moreover, with policy rates close to their effective lower bound and the Eurosystem’s balance sheet greatly expanded, the entire macrofinancial environment has been transformed.
Accordingly, the theoretical framework to study the international transmission of the ECB monetary policy stance has been enriched to take into account the role of the increased global integration of financial markets and the distinctive traits of non-standard measures. Unconventional monetary policy can have significant effects abroad through two relatively new channels.