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Globalization and Monetary Policy Comovement: Evidence from G-7 Countries

  • Arpita Chatterjee

    ()

    (School of Economics, Australian School of Business, the University of New South Wales)

This paper empirically characterizes comovement in monetary policy of G-7 countries during 1980-2009. I estimate a Taylor rule for each country and use residual from the Taylor rules to estimate a dynamic latent factor model with common and Europe speci c factors. I quantify importance of the G-7 factor in explaining comovement in residual variation of monetary policy and show that the G-7 factor is particularly important during a period of globalization (1988-2003). I estimate dynamics of importance of the G-7 factor using rolling sub-samples and show that trade-openness increases comovement in monetary policy in Europe.

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File URL: http://research.economics.unsw.edu.au/RePEc/papers/2014-19.pdf
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Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2014-19.

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Length: 41 pages
Date of creation: Apr 2014
Date of revision:
Handle: RePEc:swe:wpaper:2014-19
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