Globalization and monetary policy comovement: International evidence

Arpita Chatterjee

Journal of International Money and Finance, 2016, vol. 68, issue C, 181-202

Abstract: This paper empirically characterizes the comovement in monetary policy of five advanced economies in the period 1980–2009. I estimate a Taylor rule for each country and use the residual of the Taylor rules to estimate a dynamic latent factor model with common and Europe-specific factors. I quantify the importance of the common factor in explaining comovement in the residual variation of monetary policy and show that the common factor is particularly important during a period of globalization (1988–2003). I estimate the dynamics of the importance of the common factor using rolling sub-samples and show that trade-openness increases the importance of the common factor in monetary policy in the US.

Keywords: Comovement in monetary policy; Globalization; Dynamic latent factor model; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: C11 C38 E52 F42 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:68:y:2016:i:c:p:181-202

DOI: 10.1016/j.jimonfin.2016.06.019

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