The co-movement of monetary policy and its time-varying nature: A DCCA approach

Abhishek Rohit and Subrata Kumar Mitra

Physica A: Statistical Mechanics and its Applications, 2018, vol. 492, issue C, 1439-1448

Abstract: Employing a novel methodology of DCCA cross-correlation coefficient (ρDCCA), this study attempts to provide fresh evidences for the co-movement of monetary policies of the advanced (AEs) as well as the emerging economies (EMEs) vis-à-vis the United States. A higher degree of monetary co-movement as measured by ρDCCA values, is identified for the AEs as compared to the EMEs. Lower co-movement of monetary policy is especially noticeable in the short run for EMEs. We further investigate the time-varying nature of such co-movements for the AEs by splitting the period (1980–2014) into four sub periods and also by performing a rolling window estimation for the entire period to reveal smoother dynamics. Significant evidence of higher monetary coordination is revealed for sub-periods with stronger trade and financial linkages.

Keywords: DCCA cross-correlation coefficient; Monetary coordination; Policy spillover; Mundellian trilemma; Monetary autonomy (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:492:y:2018:i:c:p:1439-1448

DOI: 10.1016/j.physa.2017.11.071

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