What explains international interest rate co-movement?

Annika Camehl and Gregor von Schweinitz

No 3/2023, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: The international co-movement of interest rates reflects correlated business-cycle fluctuations, largely driven by demand shocks. Monetary policy in advanced economies follows domestic mandates – inflation and the output gap – and does not respond to foreign policy shocks. We derive this result from a Bayesian structural panel vector autoregression with informative priors, homogeneity restrictions on contemporaneous relations, a hierarchical Minnesota prior with cross-sectional shrinkage, and a factor structure for structural shocks.

Keywords: informative priors; panel vector autoregressions; spillovers; structural vector autoregressions (search for similar items in EconPapers)
JEL-codes: C11 C30 E52 F42 (search for similar items in EconPapers)
Date: 2026, Revised 2026
New Economics Papers: this item is included in nep-cba, nep-mon and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:32023

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