What can we tell about monetary policy synchronization and interdependence over the 2007–2009 global financial crisis?
AbstractWe investigate the synchronization and nonlinear adjustment dynamics of short-term interest rates for France, the UK and the US using the bi-directional feedback measures proposed by Geweke (1982) and appropriate smooth transition error-correction models (STECM). We find evidence to support the increasing synchronization of these rates over the period 2005–2009 as well as of their lead–lag causal interactions. Moreover, short-term interest rates converge towards a common long-run equilibrium in a nonlinear manner and their time dynamics exhibit regime-switching behavior. As far as the underlying types of monetary policies conducted by the world’s leading central banks are concerned, our empirical evidence thus reveals strong interdependence, but only some degree of synchronization.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Macroeconomics.
Volume (Year): 36 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/622617
Short-term interest rates; Monetary policy; Feedback measure; STECM;
Other versions of this item:
- Mohamed El Hedi Arouri & Duc Khuong Nguyen & Fredj Jawadi, 2010. "What can we tell about monetary policy synchronization and interdependence over the 2007-2009 global financial crisis?," Working Papers hal-00507826, HAL.
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- G01 - Financial Economics - - General - - - Financial Crises
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