Globally Correlated Nominal Fluctuations

Espen Henriksen, Finn Kydland and Roman Sustek

No 15123, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Cyclical fluctuations in nominal variables--aggregate price levels and nominal interest rates--are documented to be substantially more synchronized across countries than cyclical fluctuations in real output. A transparent mechanism that can account for this striking feature of the nominal environment is highlighted. It is based on (small) cross-country spillovers of shocks and an interaction between Taylor rules and no-arbitrage conditions. The mechanism is quantitatively important for a wide range of plausible parameterizations and is found to be robust to modifications of the economic environment that help account for other important features of domestic and international aggregate fluctuations.

JEL-codes: E31 E32 E43 F42 (search for similar items in EconPapers)
Date: 2009-07
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac, nep-mon and nep-opm
Note: ME
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Citations: View citations in EconPapers (3)

Published as Henriksen, Espen & Kydland, Finn E. & Å ustek, Roman, 2013. "Globally correlated nominal fluctuations," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 613-631.

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