What Can We Tell About Monetary Policy Synchronization And Interdependence Over The 2007-2009 Global Financial Crisis?

The authors investigate the synchronization and nonlinear adjustment dynamics of short-term interest rates for France, the UK and the US using the bi-directional feedback measures proposed by Geweke (1982) and appropriate Smooth Transition Error-Correction Models (STECM). They find strong evidence of continual increases in bilateral synchronization of these rates from 2005 to 2009 as well as of their lead-lag causal interactions with a slight dominance of the US rate. These results also indicate that short-term interest rates converge towards a common long-run equilibrium in a nonlinear manner and their time dynamics exhibit regime-switching behavior.

Provided by: Centre pour la Communication Scientifique Directe Topic: CXO Date Added: Aug 2010 Format: PDF

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