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Globally Correlated Nominal Fluctuations

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  • Espen Henriksen
  • Finn E. Kydland
  • Roman Sustek

Abstract

Cyclical fluctuations in nominal variables—aggregate price levels and nominal interest rates—are documented to be substantially more synchronized across countries than cyclical fluctuations in real output. A transparent mechanism that can account for this striking feature of the nominal environment is highlighted. It is based on (small) cross-country spillovers of shocks and an interaction between Taylor rules and no-arbitrage conditions. The mechanism is quantitatively important for a wide range of plausible parameterizations and is found to be robust to modifications of the economic environment that help account for other important features of domestic and international aggregate fluctuations.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15123.

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Date of creation: Jul 2009
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Publication status: published as Henriksen, Espen & Kydland, Finn E. & Å ustek, Roman, 2013. "Globally correlated nominal fluctuations," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 613-631.
Handle: RePEc:nbr:nberwo:15123

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Cited by:
  1. Henriksen, Espen & Kydland, Finn E. & Šustek, Roman, 2013. "Globally correlated nominal fluctuations," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 613-631.
  2. Leif Anders Thorsrud, 2013. "Global and regional business cycles. Shocks and propagations," Working Paper 2013/08, Norges Bank.
  3. Mumtaz, Haroon & Simonelli, Saverio & Surico, Paolo, 2009. "International comovements, business cycle and inflation: a historical perspective," Discussion Papers 28, Monetary Policy Committee Unit, Bank of England.
  4. Hugo Gerard, 2012. "Co-movement in Inflation," RBA Research Discussion Papers rdp2012-01, Reserve Bank of Australia.

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