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Spillovers from US monetary policy: Evidence from a time-varying parameter global vector autoregressive model

Crespo Cuaresma, Jesus and Doppelhofer, Gernot and Feldkircher, Martin and Huber, Florian (2019) Spillovers from US monetary policy: Evidence from a time-varying parameter global vector autoregressive model. Journal of the Royal Statistical Society: Series A (Statistics in Society), 182 (3). pp. 831-861. ISSN 1467-985X

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Abstract

The paper develops a global vector auto-regressive model with time varying pa- rameters and stochastic volatility to analyse whether international spillovers of US monetary policy have changed over time. The model proposed enables us to assess whether coefficients evolve gradually over time or are better characterized by infrequent, but large, breaks. Our find- ings point towards pronounced changes in the international transmission of US monetary policy throughout the sample period, especially so for the reaction of international output, equity prices and exchange rates against the US dollar. In general, the strength of spillovers has weakened in the aftermath of the global financial crisis. Using simple panel regressions, we link the vari- ation in international responses to measures of trade and financial globalization. We find that a broad trade base and a high degree of financial integration with the world economy tend to cushion risks stemming from a foreign shock such as US tightening of monetary policy, whereas a reduction in trade barriers and/or a liberalization of the capital account increase these risks.

Item Type: Article
Additional Information: Support by funds of the Jubiläumsfonds of the Oesterreichische Nationalbank (project 16244), the "Crisis, restructuring and growth" project at the Norwegian School of Economics and the European Social Fund (project "Reassessment of the optimum currency area in the persistently heterogeneous European Union, Euro4Europe") is gratefully acknowledged.
Keywords: Globalization; Mixture innovation models; Spillovers; Zero lower bound
Divisions: Departments > Volkswirtschaft > Makroökonomie
Forschungsinstitute > Human Capital and Development
Forschungsinstitute > Kryptoökonomie
Kompetenzzentren > Nachhaltigkeit
Version of the Document: Published
Depositing User: Gertraud Novotny
Date Deposited: 21 Feb 2019 13:58
Last Modified: 31 May 2019 12:56
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/89282/
URI: http://epub.wu.ac.at/id/eprint/6842

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