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Globally correlated nominal fluctuations

Henriksen, Espen, Kydland, Finn E. and Šustek, Roman (2013) Globally correlated nominal fluctuations. Journal of Monetary Economics, 60 (6). pp. 613-631. ISSN 0304-3932

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Identification Number: 10.1016/j.jmoneco.2013.05.006


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.

Item Type: Article
Official URL:
Additional Information: © 2013 Elsevier B.V.
Divisions: LSE
Subjects: H Social Sciences > HC Economic History and Conditions
Date Deposited: 01 Jul 2014 14:37
Last Modified: 20 Aug 2021 00:29
Projects: ES/L500343/1
Funders: Economic and Social Research Council

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