WP 2015-18: Transmission of US Monetary Policy Shocks towards Latin America: A GVAR approach
WP 2015-18: Transmission of US Monetary Policy Shocks towards Latin America: A GVAR approach
WP 2015-18: Transmission of US Monetary Policy Shocks towards Latin America: A GVAR approach
N°
WP 2015-18
Title
Transmission of US Monetary Policy Shocks towards Latin America: A GVAR approach
Original title
Transmisión de Choques de Política Monetaria de Estados Unidos sobre América Latina: Un Enfoque GVAR
Author(s)
Jairo Flores
Language
Spanish
Date
2015/12/31
Abstract
This paper studies the international spillovers of US monetary policy shocks across Latin American countries through trade linkages. The approach used is a GVAR model that allows to study the interdependence of countries and variables using monthly data from 2003 to 2014. In addition, given that the federal funds rate has been in the zero lower bound since the financial crisis, the paper uses an alternative measure of Fed interest rate built by Wu & Xia (2014) called the shadow federal funds rate". The paper concludes that a contractionary monetary policy shock in US has the expected impact on domestic US variables and a persistent and negative effect over economic activity and prices in Latin American countries.