Globally Correlated Nominal Fluctuations

An older version of this paper was circulated under the title "The High Cross-country Correlations of Prices and Interest Rates". We thank Jonathan Heathcote, Narayana Kocherlakota, Haroon Mumtaz, Eugene Savin, Jens Sondergaard, Kjetil Storesletten, Paolo Surico, Eric Young, and seminar participants at UCSB, UC--Davis, USC, Wharton, the Universities of Oslo, Iowa, and Southampton, Dallas Fed, Norges Bank, Bank of Korea, Universidad de Alicante, and Yonsei University, as well as conference participants at ESEM, Midwest Macro Meetings, Money Macro Finance Group, Econometric Society Summer Meetings, SED Meetings, Nordic Summer Symposium in Macroeconomics, and CFCM workshop for valuable comments and suggestions. The views in this paper are those of the authors and do not necessarily reflect those of the Bank of England, the Monetary Policy Committee, or the National Bureau of Economic Research.

• July 7, 2009