An Open-Economy Macro-Finance Model of Internatinal Interdependence: The OECD, US and the UK

Peter Spencer and Zhuoshi Liu

Discussion Papers from Department of Economics, University of York

Abstract: This paper develops a multi-country macro-finance model to study international economic and financial linkages. This approach models economic and financial variables jointly using both to throw light on such issues. The world economy is modelled using data for the US and aggregate OECD economies as well as the US Treasury bond market, using latent variables to represent a common inflation trend and a US real interest rate factor. We find strong evidence of OECD effects on the US, calling into question the standard closed economy macro-finance specification. The two global latent variables also affect the UK economy, together with two additional UK-specific latent variables. These economic linkages also help to explain the comovement of yields in the US and UK Treasury bond markets.

Keywords: macroeconomics; spillover effects; common shocks; macro-finance model; the term structure of interest rates (search for similar items in EconPapers)
JEL-codes: C12 E43 F41 G12 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://www.york.ac.uk/media/economics/documents/discussionpapers/2009/0916.pdf Main text (application/pdf)

Related works:
Journal Article: An open-economy macro-finance model of international interdependence: The OECD, US and the UK (2010)
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:yor:yorken:09/16

Access Statistics for this paper

More papers in Discussion Papers from Department of Economics, University of York Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom. Contact information at EDIRC.
Bibliographic data for series maintained by Paul Hodgson ().