A0403
Title: Tracking the global transmission dynamics of US monetary policy
Authors: Jesus Crespo Cuaresma - Vienna University of Economics and Business (Austria) [presenting]
Florian Huber - Vienna University of Economics and Business (Austria)
Martin Feldkircher - Oesterreichische Nationalbank (Austria)
Gernot Doppelhofer - NHH (Norway)
Abstract: A new class of Bayesian Global Vector Autoregressive (BGVAR) models with drifting parameters is proposed to track the dynamic effects of US monetary policy on other economies over the last three decades. In addition to assessing global linkages explicitly, the model specification accounts for time-varying parameters and stochastic volatility in order to analyze the spillovers from US monetary policy on the global economy in a very flexible manner. Our results suggest that a contractionary shock to US monetary policy (50 basis points increase in short-term US interest rate) leads to a persistent global contraction and a drop in global inflation rates, together with a rise in global interest rates, and a real depreciation of currencies with respect to the US dollar. We find evidence for important heterogeneity of the spillovers across countries and for changes in the transmission of monetary policy shocks over time.
