EconPapers    
Economics at your fingertips  
 

International transmission of shocks: a time-varying factor-augmented VAR approach to the open economy

Philip Liu (), Haroon Mumtaz and Angeliki Theophilopoulou ()

No 425, Bank of England working papers from Bank of England

Abstract: A growing literature has documented changes to the dynamics of key macroeconomic variables in industrialised countries and highlighted the possibility that these variables may react differently to structural shocks over time. However, existing empirical work on the international transmission of shocks largely abstracts from the possibility of changes to the international transmission mechanism across time. In addition, the literature has largely employed small-scale models with limited number of variables. This paper introduces an empirical model which allows the estimation of time-varying response of a large set of domestic variables to foreign money supply, demand and supply shocks. The key results show that a foreign monetary policy tightening resembles the classic beggar-thy-neighbour scenario for the United Kingdom in the period 1975-90. In more recent periods, the response is negative but largely insignificant.

Keywords: Factor augmented VAR; Time-variation; Gibbs sampling. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ets, nep-mac and nep-opm
Date: 2011-05-27
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25) Track citations by RSS feed

Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... or-augmented-var.pdf Full text (application/pdf)

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: https://EconPapers.repec.org/RePEc:boe:boeewp:0425

Access Statistics for this paper

More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().

 
Page updated 2019-06-16
Handle: RePEc:boe:boeewp:0425