NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Globally Correlated Nominal Fluctuations

Espen Henriksen, Finn E. Kydland, Roman Sustek

NBER Working Paper No. 15123
Issued in July 2009
NBER Program(s):   ME

Cyclical fluctuations in nominal variables—aggregate price levels and nominal interest rates—are documented to be substantially more synchronized across countries than cyclical fluctuations in real output. A transparent mechanism that can account for this striking feature of the nominal environment is highlighted. It is based on (small) cross-country spillovers of shocks and an interaction between Taylor rules and no-arbitrage conditions. The mechanism is quantitatively important for a wide range of plausible parameterizations and is found to be robust to modifications of the economic environment that help account for other important features of domestic and international aggregate fluctuations.

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This paper was revised on December 5, 2011

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Document Object Identifier (DOI): 10.3386/w15123

Published: Henriksen, Espen & Kydland, Finn E. & Å ustek, Roman, 2013. "Globally correlated nominal fluctuations," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 613-631. citation courtesy of

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