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How Central Banks Coordinate Policy Across Borders
Description
Episode 26 of Monetary Policy Explained explores a rarely discussed facet of central banking: international policy coordination. Lucas and Luna examine the 2025 G20 finance ministers' joint statement on monetary spillovers, focusing on how the Federal Reserve's 2024 rate cuts created ripple effects for emerging-market central banks. They dig into the specific case of the Bank of Korea's response to U.S. monetary easing, the use of swap lines, and the tension between domestic mandates and global obligations. Listeners learn why 'going it alone' often fails in a financially interconnected world and how institutions like the Bank for International Settlements facilitate quiet coordination. The episode also touches on the limits of coordination during crisis periods, such as the 2023 banking turmoil. No jargon, just clear economics.