The changing international transmission of us monetary policy shocks: is there evidence of contagion effect on oecd countries
AbstractWe study the changing international transmission of US monetary policy shocks to 14 OECD countries over the period 1981-2010. We use a Time Varying Parameter Factor Augmented VAR approach (TVP-FAVAR) to study the EFFR shocks together with a large data set of 265, major financial, macroeconomic and trade variables. Our main findings are as follows: First, negative US monetary policy shocks have considerable negative impact on GDP growth in US, Canada, Japan and Sweden while most of the other member countries benefits (with France being most benefited). Second, the transmission to GDP growth has increased in OECD countries since the early 1980s. We also detect a more depressed GDP over medium term in US, Canada, Japan, Australia, Norway and Sweden over the recent Global Financial Crisis. Third, the size of US monetary policy shocks during financial turmoil periods were unusual than normal periods and varies overtime. The Financial Crisis (2008-2009) is evidenced by decline in residential investment in US and propagation of this shock to Canada, Germany, Japan, Switzerland and New Zealand over the recent period. US monetary policy shocks reduce share prices in most of the OECD countries; this impact is more pronounced over the turmoil period. Asset prices, interest rates and trade channel seem to play major role in propagation of monetary policy shocks.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 31 (2011)
Issue (Month): 4 ()
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Monetary policy shocks; financial markets; international transmission channels; global integration; turmoil periods; time varying parameter FAVAR;
Other versions of this item:
- Kazi, Irfan Akbar & Wagan, Hakimzadi & Akbar, Farhan, 2013. "The changing international transmission of U.S. monetary policy shocks: Is there evidence of contagion effect on OECD countries," Economic Modelling, Elsevier, vol. 30(C), pages 90-116.
- Irfan Akbar Kazi & Hakimzadi Wagan & Farhan Akbar, 2012. "The changing international transmission of US monetary policy shocks: is there evidence of contagion effect on OECD countries," EconomiX Working Papers 2012-27, University of Paris West - Nanterre la Défense, EconomiX.
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
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