International Monetary Coordination and the Financial Crisis: A Network Analysis
40 Pages Posted: 29 Mar 2017 Last revised: 21 Apr 2017
Date Written: March 27, 2017
We empirically examine international monetary coordination by identifying the network structure of four major central banks: The Bank of England, Bank of Japan, European Central Bank and Federal Reserve Bank. We calculate the time-varying connectedness measure developed by Diebold and Yilmaz (2005). Specifically, we investigate the interdependence of monetary policy actions and how the interaction between these central banks change over time. The construction of the network structure for different time periods allows to study the effect of the 2008 financial crisis. We investigate the structural break dates for the network structure to determine the exact dates of convergence and decoupling of monetary policy. The empirical analysis shows that monetary policy interdependence is higher for the October 2008-July 2013 period.
Keywords: Monetary Policy; Zero Lower Bound; Policy Coordination; Network Structure
JEL Classification: E43; E44; E52
Suggested Citation: Suggested Citation