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The transmission mechanism in a changing world

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  • Michael ARTIS
  • Ana Beatriz C. GALVÃO
  • Massimiliano MARCELLINO

Abstract

This paper aims at improving the understanding of the transmission of shocks across countries and how this transmission may have changed over time. By employing a model that allows for parameter changes across regimes, we show that transmission of shocks from the US to European countries may depend on the values of transition variables such as financial prices, exchange rates, international capital flows, trade links and monetary policy instruments. We also show that transmission mechanisms estimated with the proposed models have good performance in describing the 2001 downturn in some European countries as an e.ect of a US shock. More generally, the models have a good forecasting performance over short horizons.

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Bibliographic Info

Paper provided by European University Institute in its series Economics Working Papers with number ECO2003/18.

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Date of creation: 2003
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Handle: RePEc:eui:euiwps:eco2003/18

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