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

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  • Arpita Chatterjee

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

Abstract

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.

Suggested Citation

  • Arpita Chatterjee, 2014. "Globalization and Monetary Policy Comovement: Evidence from G-7 Countries," Discussion Papers 2014-19, School of Economics, The University of New South Wales.
    • Handle: RePEc:swe:wpaper:2014-19
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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2014-19.pdf
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    References listed on IDEAS

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    Cited by:

    1. Arpita Chatterjee & Richa Saraf, 2017. "Impact of China on World Commodity Prices and Commodity Exporters," Discussion Papers 2017-13, School of Economics, The University of New South Wales.
    2. Phan, Tuan, 2016. "Has Monetary Policy Become More Aggressive, But Less Effective Over Time?," MPRA Paper 107200, University Library of Munich, Germany.

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    More about this item

    Keywords

    Symmetry-breaking; Endogenous comparative advantage; Gains from trade; Education policy;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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