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International Monetary Policy Spillovers: Evidence from a TVP-VAR

Author

Listed:
  • Nikolaos Antonakakis

    (Department of Business and Management, Webster Vienna Private University, Praterstrasse Vienna, Austria and Economics and Finance Subject Group, University of Portsmouth, Portsmouth Business School, Portsmouth, UK)

  • David Gabauer

    (Department of Business and Management, Webster Vienna Private University, Praterstrasse Vienna, Austria)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

Abstract

In this study, we examine the transmission of international monetary policy shocks across developed economies based on a time-varying parameter vector autoregressive (TVP-VAR) methodology. Using daily data on shadow short rates over the period of January 2, 1995 to September 22, 2017, we find the following empirical regularities. International monetary policy shocks are an important source of domestic monetary policy fluctuations. Moreover, the magnitude of international monetary policy spillovers behaves heterogeneously overtime, with peaks reached during the “Great Recession”. In addition, the dominant transmitters of international monetary policy shocks are the Euro Area and the US, while Japan and the UK are the dominant receivers of international monetary policy shocks. Interestingly enough, international monetary policy shocks originating from the US are the largest during the zero lower bound and the related unconventional monetary policy actions era, indicating potential gains from monetary policy coordination.

Suggested Citation

  • Nikolaos Antonakakis & David Gabauer & Rangan Gupta, 2018. "International Monetary Policy Spillovers: Evidence from a TVP-VAR," Working Papers 201806, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201806
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Monetary policy spillovers; Dynamic connectedness; TVP-VAR;
    All these keywords.

    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
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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