Arbeitspapier
Monetary Policy and Exchange Rates: A Balanced Two-Country Cointegrated VAR Model Approach
We study the exchange rate effects of monetary policy in a balanced macroeconometric two-country model for the US and UK. In contrast to the empirical literature on the 'delayed overshooting puzzle', which consistently treats the domestic and foreign countries unequally in themodelling process, we consider the full model feedback, allowing for a thorough analysis of the system dynamics. The consequential inevitable problem of model dimensionality is tackled in this paper by invoking the approach by Aoki (1981) commonly used in economic theory. Assuming country symmetry in the long-run allows to decouple the two-country macro dynamics of country averages and country differences such that the cointegration analysis can be applied to much smaller systems. Secondly the econometric modelling is general-to-specific, a graph-theoretic approach for the contemporaneous effects combined with an automatic general-to-specific model selection. The resulting parsimonious structural vector equilibrium correction model ensures highly significant impulse responses, revealing a delayed overshooting of the exchange rate in the case of a Bank of England monetary shock but suggests an instantaneous response to a Fed shock. Altogether the response is more pronounced in the former case.
- Sprache
-
Englisch
- Erschienen in
-
Series: School of Economics Discussion Papers ; No. 1321
- Klassifikation
-
Wirtschaft
Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Econometric Modeling: General
- Thema
-
Two-country model
Cointegration
Structural VAR
Gets Model Selection
Monetary Policy
Exchange Rates
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Heinlein, Reinhold
Krolzig, Hans-Martin
- Ereignis
-
Veröffentlichung
- (wer)
-
University of Kent, School of Economics
- (wo)
-
Canterbury
- (wann)
-
2013
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Heinlein, Reinhold
- Krolzig, Hans-Martin
- University of Kent, School of Economics
Entstanden
- 2013
Ähnliche Objekte (12)
Exchange rate volatility and export performance: A cointegrated VAR approach
Symmetry and Separability in Two-Country Cointegrated VAR Models: Representation and Testing
Money, stock prices and central banks: Cross-country comparisons of cointegrated VAR models
Monetary Policy, Stock Prices and Central Banks - Cross-Country Comparisons of Cointegrated VAR Models
Monetary Policy, Stock Prices and Central Banks - Cross-Country Comparisons of Cointegrated VAR Models
Measuring the Impact of Exchange Rate Movements on Domestic Prices: A Cointegrated VAR Analysis
Identifying Structural Breaks in Cointegrated VAR Models
Nonstationary cointegration in the fractionally cointegrated VAR model
Cointegrated VAR model and China's monetary policy : 1979 - 2004
Theory and applications in non-linear cointegrated VAR models
On the construction of two-country cointegrated VAR models with an application to the UK and US
Implementing optimal control in cointegrated I(I) structural VAR models
Exchange rate volatility and export performance: A cointegrated VAR approach
Symmetry and Separability in Two-Country Cointegrated VAR Models: Representation and Testing
Money, stock prices and central banks: Cross-country comparisons of cointegrated VAR models
Monetary Policy, Stock Prices and Central Banks - Cross-Country Comparisons of Cointegrated VAR Models
Monetary Policy, Stock Prices and Central Banks - Cross-Country Comparisons of Cointegrated VAR Models
Measuring the Impact of Exchange Rate Movements on Domestic Prices: A Cointegrated VAR Analysis
Identifying Structural Breaks in Cointegrated VAR Models
Nonstationary cointegration in the fractionally cointegrated VAR model
Cointegrated VAR model and China's monetary policy : 1979 - 2004
Theory and applications in non-linear cointegrated VAR models
On the construction of two-country cointegrated VAR models with an application to the UK and US
Implementing optimal control in cointegrated I(I) structural VAR models
Exchange rate volatility and export performance: A cointegrated VAR approach
Symmetry and Separability in Two-Country Cointegrated VAR Models: Representation and Testing
Money, stock prices and central banks: Cross-country comparisons of cointegrated VAR models
Monetary Policy, Stock Prices and Central Banks - Cross-Country Comparisons of Cointegrated VAR Models
Monetary Policy, Stock Prices and Central Banks - Cross-Country Comparisons of Cointegrated VAR Models
Measuring the Impact of Exchange Rate Movements on Domestic Prices: A Cointegrated VAR Analysis
Identifying Structural Breaks in Cointegrated VAR Models
Nonstationary cointegration in the fractionally cointegrated VAR model
Cointegrated VAR model and China's monetary policy : 1979 - 2004
Theory and applications in non-linear cointegrated VAR models
On the construction of two-country cointegrated VAR models with an application to the UK and US