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The Transmission Mechanism in a Changing World

Author Info

  • Artis, Michael J
  • Galvão, Ana Beatriz C
  • Marcellino, Massimiliano

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 effect of a US shock. More generally, the models have a good forecasting performance over short horizons.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4014.

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Date of creation: Aug 2003
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Handle: RePEc:cpr:ceprdp:4014
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Keywords: cycles; europe; impulse response; non-linear VAR; shocks; transmission mechanism;

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Find related papers by JEL classification:
  • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
  • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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