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The co-movement of monetary policy and its time-varying nature: A DCCA approach

Author

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  • Rohit, Abhishek
  • Mitra, Subrata Kumar

Abstract

Employing a novel methodology of DCCA cross-correlation coefficient (ρDCCA), this study attempts to provide fresh evidences for the co-movement of monetary policies of the advanced (AEs) as well as the emerging economies (EMEs) vis-à-vis the United States. A higher degree of monetary co-movement as measured by ρDCCA values, is identified for the AEs as compared to the EMEs. Lower co-movement of monetary policy is especially noticeable in the short run for EMEs. We further investigate the time-varying nature of such co-movements for the AEs by splitting the period (1980–2014) into four sub periods and also by performing a rolling window estimation for the entire period to reveal smoother dynamics. Significant evidence of higher monetary coordination is revealed for sub-periods with stronger trade and financial linkages.

Suggested Citation

  • Rohit, Abhishek & Mitra, Subrata Kumar, 2018. "The co-movement of monetary policy and its time-varying nature: A DCCA approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 492(C), pages 1439-1448.
    • Handle: RePEc:eee:phsmap:v:492:y:2018:i:c:p:1439-1448
    DOI: 10.1016/j.physa.2017.11.071
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    Cited by:

    1. Kang, Sang Hoon & Lahmiri, Salim & Uddin, Gazi Salah & Arreola Hernandez, Jose & Yoon, Seong-Min, 2020. "Inflation cycle synchronization in ASEAN countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).

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