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Author Henriksen, Espen ♦ Kydland, Finn E. ♦ Sustek, Roman
Source CiteSeerX
Content type Text
File Format PDF
Subject Domain (in DDC) Computer science, information & general works ♦ Data processing & computer science
Subject Keyword Interest Rate ♦ High Cross-country Correlation ♦ Modest Spillover ♦ Domestic Monetary Policy ♦ Business Cycle Frequency ♦ Nominal Variable ♦ Current Price ♦ Cross-country Aggregate Fluctuation ♦ Parsimonious International Business Cycle Model ♦ Technology Shock ♦ Aggregate Price Level ♦ Inflation Generate Movement ♦ National Central Bank ♦ Nominal Interest Rate ♦ Domestic Nominal Variable ♦ Real Output ♦ Cross-country Correlation ♦ Domestic Output ♦ Future Response
Abstract We document that, at business cycle frequencies, fluctuations in nominal variables, such as aggregate price levels and nominal interest rates, are substantially more synchronized across countries than fluctuations in real output. To the extent that domestic nominal variables are largely determined by domestic monetary policy, this might seem surprising. We ask if a parsimonious international business cycle model can account for this aspect of cross-country aggregate fluctuations. It can. Due to spillovers of technology shocks across countries, expected future responses of national central banks to fluctuations in domestic output and inflation generate movements in current prices and interest rates that are synchronized across countries even when output is not. Even modest spillovers produce cross-country correlations such as those in the data.
Educational Role Student ♦ Teacher
Age Range above 22 year
Educational Use Research
Education Level UG and PG ♦ Career/Technical Study
Publisher Date 2010-01-01