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What can we tell about monetary policy synchronization and interdependence over the 2007–2009 global financial crisis?

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  • Arouri, Mohamed
  • Jawadi, Fredj
  • Nguyen, Duc Khuong

Abstract

We 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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  • Arouri, Mohamed & Jawadi, Fredj & Nguyen, Duc Khuong, 2013. "What can we tell about monetary policy synchronization and interdependence over the 2007–2009 global financial crisis?," Journal of Macroeconomics, Elsevier, vol. 36(C), pages 175-187.
  • Handle: RePEc:eee:jmacro:v:36:y:2013:i:c:p:175-187 DOI: 10.1016/j.jmacro.2012.11.006
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    Cited by:

    1. Víctor Alexánder Díaz España, 2014. "Crédito privado, crédito bancario y producto interno bruto: evidencia para una muestra suramericana," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 32(73), pages 104-126, July.
    2. Floro, Danvee & van Roye, Björn, 2017. "Threshold effects of financial stress on monetary policy rules: A panel data analysis," International Review of Economics & Finance, Elsevier, pages 599-620.
    3. J. Sebastian Amador-Torres & Jose Eduardo Gomez-Gonzalez & Sebastian Sanin-Restrepo, 2017. "I know what you did during the last bubble: Determinants of housing bubbles' duration in OECD countries," Borradores de Economia 1005, Banco de la Republica de Colombia.

    More about this item

    Keywords

    Short-term interest rates; Monetary policy; Feedback measure; STECM;

    JEL classification:

    • 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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