Article ID Journal Published Year Pages File Type
966513 Journal of Monetary Economics 2013 19 Pages PDF
Abstract
Fluctuations in nominal variables-aggregate price levels and nominal interest rates-are documented to be substantially more synchronized across countries at business cycle frequencies than fluctuations in real output. A transparent mechanism accounting for this striking feature of the nominal environment is described and quantitatively evaluated. It is based on the interaction between (small) cross-country spillovers of shocks, Taylor rules, and domestic no-arbitrage conditions. The mechanism is robust to various parameterizations and extensions aligning the model with other important aspects of domestic and international fluctuations. Furthermore, its key features are consistent with cross-country forecasts from Consensus survey.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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