Globalization and Monetary Policy: An Empirical Analysis

Arpita Chatterjee

No 2013-08, Discussion Papers from School of Economics, The University of New South Wales

Abstract: This paper studies the evolution of comovement in monetary policy of the G-7 countries during the period 1980-2009. I estimate a Taylor rule for each country and use the residuals from the Taylor rule to estimate a Bayesian dynamic latent factor model allowing for common and Europe speci?c components. I quantify the importance of the G-7 factor in explaining the residual of the Taylor rule, and show that the G-7 factor plays a very important role during the period of globalization (1988- 2003). I esimate the time path of the importance of the G-7 factor using rolling sub-samples, and show that both trade-openness and ?nancial integration increase comovement in monetary policy.

JEL-codes: E52 F24 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2013-08
New Economics Papers: this item is included in nep-mon
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Citations: View citations in EconPapers (1)

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