Foreign dollar-denominated sovereign debt is “highly responsive” to Federal Reserve monetary policy, a paper published by the Federal Reserve finds.

Simon Gilchrist, Vivian Yue and Egon Zakrajsek measure how yields on foreign government debt issued in dollars respond to US unconventional and conventional policy surprises. The researchers use daily secondary market prices of dollar-denominated sovereign bonds issued by almost 80 countries, including both advanced and emerging market economies.