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The Empirics of International Monetary Transmission: Identification and the Impossible Trinity
Author(s) -
BLUEDORN JOHN C.,
BOWDLER CHRISTOPHER
Publication year - 2010
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2010.00303.x
Subject(s) - interest rate , economics , international fisher effect , monetary policy , interest rate parity , exchange rate , concordance , monetary economics , transmission (telecommunications) , identification (biology) , real interest rate , macroeconomics , econometrics , international economics , fisher hypothesis , computer science , medicine , botany , biology , telecommunications
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.