Active driver or passive victim : on the role of international monetary policy transmission / Annika Camehl, Gregor von Schweinitz
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Active driver or passive victim
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1833068580
URN
urn:nbn:de:gbv:3:2-937482
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Publication history
Halle (Saale), Germany : Halle Institute for Economic Research (IWH) - Member of the Leibniz Association, January 2023
Content
1 Online-Ressource (III, 36 Seiten, 2,43 MB) : Diagramme
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Language
eng
Comment
Literaturverzeichnis: Seite 32-36
Abstract
We provide new insights into determinants of international interest rates spillovers across seven advanced economies. To disentangle and quantify their respective importance, we identify country-specific structural monetary policy, demand, and supply equations in a Bayesian structural panel vector autoregressive model. We formulate prior beliefs on magnitudes and signs of contemporaneous structural coefficients (i.e., (semi-)elasticities), based on a standard theoretical multi-country open economy model from the literature. Our findings show that interest rate spillovers occur via an aggregated demand channel. Unexpected monetary tightening causes modest declines in most foreign interest rates, while demand and supply shocks result in increased foreign interest rates. Our results support that central banks respond to changes in the domestic macroeconomic environment induced by domestic or foreign shocks rather than directly reacting to foreign shocks. Spillovers are quantitatively stronger for shocks originating in economically large areas with strong trade linkages.
Series
IWH-Diskussionspapiere ; 2023, no. 3 (January 2023) ppn:837399270