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US Monetary Policy in a Globalized World

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  • Crespo Cuaresma, Jesus

    ()

  • Doppelhofer, Gernot

    ()

  • Feldkircher, Martin

    ()

  • Huber, Florian

    ()

Abstract

We analyze the interaction between monetary policy in the US and the global economy proposing a new class of Bayesian global vector autoregressive models that accounts for time-varying parameters and stochastic volatility (TVP-SV-GVAR). Our results suggest that US monetary policy responds to shocks to the global economy, in particular to global aggregate demand and monetary policy shocks. On the other hand, US-based contractionary monetary policy shocks lead to persistent international output contractions and a drop in global inflation rates, coupled with rising interest rates in advanced economies and a real depreciation of currencies with respect to the US dollar. We find considerable evidence for heterogeneity in the spillovers across countries, as well for changes in the transmission of monetary policy shocks over time. (authors' abstract)

Suggested Citation

  • Crespo Cuaresma, Jesus & Doppelhofer, Gernot & Feldkircher, Martin & Huber, Florian, 2015. "US Monetary Policy in a Globalized World," Department of Economics Working Paper Series 4709, WU Vienna University of Economics and Business.
  • Handle: RePEc:wiw:wus005:4709
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    Cited by:

    1. repec:eee:ecosys:v:42:y:2018:i:1:p:91-105 is not listed on IDEAS
    2. Huber, Florian & Punzi, Maria Teresa, 2017. "The shortage of safe assets in the US investment portfolio: Some international evidence," Journal of International Money and Finance, Elsevier, vol. 74(C), pages 318-336.
    3. Hajek, Jan & Horvath, Roman, 2018. "International spillovers of (un)conventional monetary policy: The effect of the ECB and the US Fed on non-euro EU countries," Economic Systems, Elsevier, vol. 42(1), pages 91-105.
    4. Markus Eller & Martin Feldkircher & Florian Huber, 2017. "How would a fiscal shock in Germany affect other European countries? Evidence from a Bayesian GVAR model with sign restrictions," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 54-77.

    More about this item

    Keywords

    Global vector autoregression; time-varying parameters; stochastic volatility; monetary policy; international spillovers;

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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