ECB analysis finds that a tightening by the Federal Reserve System generates spillovers to euro area real activity and inflation that are comparable to the effects of this tightening on the US economy.
Estimates are obtained based on a sample spanning 1991 to 2019, using high frequency-based US monetary policy shocks (sum of conventional, Odyssean forward guidance and quantitative easing) in monthly smooth local projections. For example, a one standard deviation US monetary policy tightening shock contracts US and euro area equity prices about equally by up to 0.75% over a two-year horizon. See Lane, P.R.