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The changing international transmission of US monetary policy shocks: is there evidence of contagion effect on OECD countries

Author

Listed:
  • Irfan Akbar Kazi

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Hakimzadi Wagan
  • Farhan Akbar
Abstract
We study the changing international transmission of US monetary policy shocks to 14 major OECD countries over the period 1981Q1-2010Q4. We use a time-varying parameter factor augmented VAR approach to study the effective federal funds rate shocks together with a large data set of 265, major financial, macroeconomic and trade variables. Our main findings are as follows. First, negative US monetary policy shocks have considerable negative impact on GDP growth in the US, Canada, Japan and Sweden whereas there is positive impact on GDP growth in the most of the other member countries. Second, the transmission to GDP growth has increased in OECD countries since the early 1980s. Third, the transmission of US monetary policy shocks to major economic and financial variables varies in magnitude during financial turmoil periods than normal periods such as the gross fixed capital formation residential, turned most negative over the second quarter after the initial shock in the US, Canada, Germany, Japan, Switzerland and New Zealand mainly during 2008Q4. Asset prices, interest rates and trade channel seem to play major role in propagation of monetary policy shocks.

Suggested Citation

  • Irfan Akbar Kazi & Hakimzadi Wagan & Farhan Akbar, 2012. "The changing international transmission of US monetary policy shocks: is there evidence of contagion effect on OECD countries," Working Papers hal-04141067, HAL.
    • Handle: RePEc:hal:wpaper:hal-04141067
    Note: View the original document on HAL open archive server: https://hal.science/hal-04141067
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