Small, open economies can create “substantial” spillovers when setting monetary policy, contrary to standard theory, new research from the International Monetary Fund finds.

In a working paper, authors Marijn Bolhuis, Sonali Das and Bella Yao construct a new dataset of monetary policy shocks using high-frequency data from swaps markets in 29 countries. The data includes advanced and emerging economies.

Small, open economies are normally defined as those that are vulnerable to cross-border policy

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