Capital Controls and the International Transmission of U.S. Money Shocks

Miniane, Jacques; Rogers, John H.

doi:10.1111/j.1538-4616.2007.00056.x

Cited by 106 publications

(22 citation statements)

References 50 publications

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“…Specifically, we code countries with average capital account openness that is larger than the grand median of the measure as having mobile capital, and those with average openness below the grand median as having immobile capital. This is similar to the split that Miniane and Rogers (2007) implement with Miniane's (2004) data in their study. We then combine the Chinn and Ito binary capital mobility indicator with our other inclusion criteria (see ) to derive a new sample.…”

Section: Robustnesssupporting

confidence: 84%

“…They find either no support or weak support for the trade‐offs implied by the trilemma. More recently, Miniane and Rogers (2007) identify U.S. interest rate shocks from structural vector autoregressions (SVARs) and estimate their transmission to a range of foreign interest rates. Consistent with the trilemma logic, the transmission to pegged exchange rate regimes is stronger, although the effect is not significant at conventional levels.…”

mentioning

confidence: 99%

“…We argue that the identification approaches employed here will minimize biases, not only compared to the realized federal funds rate but also compared to policy shocks from SVARs, such as those employed by Miniane and Rogers (2007) in their study of international monetary transmission. The latter approach relies on current and lagged values of output, prices, and other variables to control for policy changes that are either endogenous to forecasted economic conditions or anticipated from market information.…”

mentioning

confidence: 99%

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The Empirics of International Monetary Transmission: Identification and the Impossible Trinity

Bluedorn¹,

Bowdler²

2010

J of Money Credit Banking

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The transmission of monetary policy across borders is central to many open economy models. Research has tried to evaluate the "impossible trinity" through estimating international interest rate linkages under alternative exchange rate regimes using realized base country interest rates. Such interest rates include anticipated and endogenous elements, which need not propagate internationally. We compare international interest rate responses under pegged and non-pegged regimes to identified, unanticipated, and exogenous U.S. interest rate changes and realized U.S. interest rate changes. We find important differences in estimated transmission from the two sets of measures-identified interest rate changes demonstrate a greater concordance with the impossible trinity than realized rate changes. THE IDEA THAT monetary policy autonomy depends on the choice of exchange rate regime has long been prominent in international macroeconomics. According to the "impossible trinity" or open economy trilemma, when capital is mobile a country that maintains a fixed (or pegged) exchange rate against a

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Section: Robustnesssupporting

confidence: 84%

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confidence: 99%

mentioning

confidence: 99%

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The Empirics of International Monetary Transmission: Identification and the Impossible Trinity

Bluedorn¹,

Bowdler²

2010

J of Money Credit Banking

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“…This work extends the FAVAR approach developed by Bernanke, Boivin, and Eliasz (2005) to the open economy. Other contributions using large panel of international data include Miniane and Rogers (2007), Laganá and Mountford (2005), Rüffer and Stracca (2006), and Sousa and Zaghini (2007). These papers, however, focus on the role of capital controls and excess global liquidity.…”

mentioning

confidence: 99%

The Transmission of International Shocks: A Factor‐Augmented VAR Approach

Mumtaz¹,

Surico²

2009

J of Money Credit Banking

154

101

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The empirical literature on the transmission of international shocks is based on small-scale VARs. In this paper, we use a large panel of data for 17 industrialized countries to investigate the international transmission mechanism, and revisit the anomalies that arise in the empirical literature. We propose a factor augmented VAR (FAVAR) that extends the model in Bernanke, Boivin, and Eliasz (2005) to the open economy. The main results can be summarized as follows. First, the dynamic effects on the UK economy of an unanticipated fall of short-term interest rates in the rest of the world are: real house price inflation, investment, GDP and consumption growth peak after 1 year, wages peak after 2 years, and CPI and GDP deflator inflation peak during the third year. Second, a positive international supply shock makes the distribution of the components of the UK consumption deflator negatively skewed. Third, in response to a domestic monetary shock, we find little evidence of the exchange rate and liquidity puzzles and little evidence of the forward discount and price anomalies.JEL codes: E52, F41

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“…Indeed, the issue of monetary policy independence is a key consideration when policymakers determine the choice of exchange rate arrangement in their countries. The empirical validity and relevance of the policy trilemma have been much studied in the literature, see Obstfeld et al (2005); Miniane and Rogers (2007) among others.…”

Section: Introductionmentioning

confidence: 99%

International Transmission of Interest Rates and the Open Economy Trilemma in Asia

Chow

2014

Singapore Econ. Rev.

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There has recently been much discussion on the relevance of the open economy trilemma in the context of deepening financial integration of countries across the world (see for instance, Rey (2013) and Devereux and Yetman (2014)). The open economy trilemma is an important issue for the countries in Asia not least because their financial systems are small and exchange rate stability is crucial to their economic growth. This paper investigates whether the economies in Asia are still bound by the "impossible trinity" by examining the interest rate transmission from the US to the region before and after the onset of the global financial crisis. We make a distinction between longrun versus short-run transmission of interest rates by conducting the Peseran bounds test of cointegration and Wald test of joint significance respectively on autoregressive distributed lag models estimated with data from nine Asian economies. The findings on the strength of interest rate passthrough are related to each country's trilemma configuration. Overall, our empirical results provide some supporting evidence that the Asian economies are still constrained by the open economy trilemma.Singapore Econ. Rev. 2014.59. Downloaded from www.worldscientific.com by UNIVERSITY OF MICHIGAN on 02/03/15. For personal use only. 2 We highlight only two studies whose econometric approach is similar to ours in the examination of responses to observed changes in the US interest rates, please see references therein for other papers on this topic. Another strand of the literature deals with the effect of international monetary transmission on other macroeconomic aggregates such as real output growth and inflation levels. See for instance Giovanni and Shambaugh (2008).

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Capital Controls and the International Transmission of U.S. Money Shocks

Cited by 106 publications

References 50 publications

The Empirics of International Monetary Transmission: Identification and the Impossible Trinity

The Empirics of International Monetary Transmission: Identification and the Impossible Trinity

The Transmission of International Shocks: A Factor‐Augmented VAR Approach

International Transmission of Interest Rates and the Open Economy Trilemma in Asia

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