Economics at your fingertips  

Dynamics of monetary policy spillover: The role of exchange rate regimes

Abhishek Kumar Rohit and Pradyumna Dash

Economic Modelling, 2019, vol. 77, issue C, 276-288

Abstract: In a time-varying framework, our study investigates the role of exchange rate regimes in explaining monetary policy spillover across a set of AEs and EMEs. We also investigate the channels contributing to the dynamism in the degree of such spillover. We find that the flexible exchange rate regime in the AEs insulates them against the spillover to a relatively larger extent as compared to the managed float regime in the EMEs. We also find that the spillover is strongly time-varying, being influenced by macroeconomic conditions in the centre economy. Risk-taking, portfolio rebalancing, and signaling channels are found to be significant in explaining the rise in spillover in the EMEs, but not in the AEs. The rise in the connectedness of interest rates in the AEs occurred only during the global financial crisis (2008–12), owing to their higher policy coordination with the US. This should not be misconstrued as monetary policy spillover.

Keywords: Mundellian trilemma; Policy spillovers; Spillover index; Monetary autonomy; Liquidity; VIX (search for similar items in EconPapers)
JEL-codes: E43 E52 F36 F65 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-08-10
Handle: RePEc:eee:ecmode:v:77:y:2019:i:c:p:276-288