Monetary Policy across Space and Time

Liu, Laura; Matthes, Christian; Petrova, Katerina

Working Paper

Monetary Policy across Space and Time

Abstract: In this paper we ask two questions: (i) is the conduct of monetary policy stable across time and similar across major economies, and (ii) do policy decisions of major central banks have international spillover effects. To address these questions, we build on recent semi-parametric advances in time-varying parameter models that allow us to increase the VAR dimension and to jointly model three advanced economies (US, UK, and the Euro Area). In order to study policy spillovers, we jointly identify three economy-specific monetary policy shocks using a combination of sign and magnitude restrictions.

Keywords: Monetary policy spillovers; time-varying parameters; changing volatility;

JEL Classification: C54; E30; E58;