US Monetary Policy in a Globalized World

Jesus Crespo Cuaresma, Gernot Doppelhofer, Martin Feldkircher, Florian Huber

Publication: Working/Discussion PaperWU Working Paper

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Abstract

We analyze the interaction between monetary policy in the US and the global economy proposing a new class of Bayesian global vector autoregressive models that accounts for time-varying parameters and stochastic volatility (TVP-SV-GVAR). Our results suggest that US monetary policy responds to shocks to the global economy, in particular to global aggregate demand and monetary policy shocks. On the other hand, US-based contractionary monetary policy shocks lead to persistent international output contractions and a drop in global inflation rates, coupled with rising interest rates in advanced economies and a real depreciation of currencies with respect to the US dollar. We find considerable evidence for heterogeneity in the spillovers across countries, as well for changes in the transmission of monetary policy shocks over time.
Original languageEnglish
Place of PublicationVienna
PublisherWU Vienna University of Economics and Business
Publication statusPublished - 1 Nov 2015

Publication series

NameDepartment of Economics Working Paper Series
No.209

WU Working Paper Series

  • Department of Economics Working Paper Series

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