US policy tightening heightens chance of crisis for close partners, paper finds

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US monetary policy tightening increases the probability of banking crises in countries with direct trade or dollar liability linkages to the US, three Federal Reserve economists find.

The paper, authored by Bora Durdu, Alex Martin and Ilknur Zer, examines the role of US monetary policy in global financial stability by using a cross-country database across 69 countries from the period of 1870–2010.

The researchers define a crisis as “an event with a closure, merger, or public takeover of one or

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