US monetary policy uncertainty drives global business cycles

Though the reactions of economic activities in the US and globally to FED policy are well documented, the global impacts of unexpected changes in the US monetary policy uncertainty are still less understood. Povilas Lastauskas and Anh D. M. Nguyen highlight the role of uncertainty in generating synchronised worldwide contraction and rationalising the global economy’s slow recovery from global financial crisis. Despite the common wisdom that the US is a large economy with ignorable effects from the rest of the world, the spillback effects are non-trivial.