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 major OECD countries over the period 1981Q1-2010Q4. We use a time-varying parameter factor augmented VAR approach to study the effective federal funds rate 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 the US, Canada, Japan and Sweden whereas there is positive impact on GDP growth in the most of the other member countries. Second, the transmission to GDP growth has increased in OECD countries since the early 1980s. Third, the transmission of US monetary policy shocks to major economic and financial variables varies in magnitude during financial turmoil periods than normal periods such as the gross fixed capital formation residential, turned most negative over the second quarter after the initial shock in the US, Canada, Germany, Japan, Switzerland and New Zealand mainly during 2008Q4. Asset prices, interest rates and trade channel seem to play major role in propagation of monetary policy shocks.
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Bibliographic InfoPaper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2012-27.
Length: 54 pages
Date of creation: 2012
Date of revision:
Monetary policy shocks; financial markets; international transmission channels; global integration; turmoil periods; time-varying parameter factor augmented VAR.;
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, 2011. "The changing international transmission of us monetary policy shocks: is there evidence of contagion effect on oecd countries," Economics Bulletin, AccessEcon, vol. 31(4), pages A49.
- F1 - International Economics - - Trade
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- F15 - International Economics - - Trade - - - Economic Integration
- C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-06-25 (All new papers)
- NEP-CBA-2012-06-25 (Central Banking)
- NEP-MAC-2012-06-25 (Macroeconomics)
- NEP-MON-2012-06-25 (Monetary Economics)
- NEP-OPM-2012-06-25 (Open Economy Macroeconomic)
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