Globally correlated nominal fluctuations
Globally correlated nominal fluctuations
Cyclical fluctuations in nominal variables—aggregate price levels and nominal interest rates—are documented to be substantially more synchronized across countries than cyclical fluctuations in real output. A transparent mechanism that can account for this striking feature of the nominal environment is highlighted. It is based on (small) cross-country spillovers of shocks and an interaction between Taylor rules and no-arbitrage conditions. The mechanism is quantitatively important for a wide range of plausible parameterizations and is found to be robust to modifications of the economic environment that help account for other important features of domestic and international aggregate fluctuations
National Bureau of Economic Research
Henriksen, Espen
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Kydland, Finn E.
41594e46-b757-47f2-af1f-9e5b429e8cd2
Sustek, Roman
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July 2009
Henriksen, Espen
1b47ee73-b281-48c8-9457-77fad7de908e
Kydland, Finn E.
41594e46-b757-47f2-af1f-9e5b429e8cd2
Sustek, Roman
9ba777eb-9161-49c3-9a2c-6cc61cb3a092
Henriksen, Espen, Kydland, Finn E. and Sustek, Roman
(2009)
Globally correlated nominal fluctuations
(National Bureau of Economic Research, 15123)
Cambridge, US.
National Bureau of Economic Research
44pp.
Record type:
Monograph
(Working Paper)
Abstract
Cyclical fluctuations in nominal variables—aggregate price levels and nominal interest rates—are documented to be substantially more synchronized across countries than cyclical fluctuations in real output. A transparent mechanism that can account for this striking feature of the nominal environment is highlighted. It is based on (small) cross-country spillovers of shocks and an interaction between Taylor rules and no-arbitrage conditions. The mechanism is quantitatively important for a wide range of plausible parameterizations and is found to be robust to modifications of the economic environment that help account for other important features of domestic and international aggregate fluctuations
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Published date: July 2009
Organisations:
Economics
Identifiers
Local EPrints ID: 203667
URI: http://eprints.soton.ac.uk/id/eprint/203667
PURE UUID: 2f9c5454-f46b-4293-8848-fe5305f25bc3
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Date deposited: 18 Nov 2011 14:51
Last modified: 29 Jan 2020 14:49
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Contributors
Author:
Espen Henriksen
Author:
Finn E. Kydland
Author:
Roman Sustek
University divisions
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