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An open-economy macro-finance model of international interdependence : The OECD, US and the UK

Spencer, Peter and Liu, Zhuoshi (2010) An open-economy macro-finance model of international interdependence : The OECD, US and the UK. Journal of Banking and Finance. pp. 667-680. ISSN 0378-4266

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Abstract

This paper develops a multi-country macro-finance model to study international economic and financial linkages. This approach models the economy and financial markets jointly using both types of data to throw light on such issues. The world economy is modelled using data for the US and aggregate OECD economies as well as the US Treasury bond market using latent variables to represent a common inflation trend and a US real interest rate factor. We find strong evidence of global effects on both the US and UK, calling into question the standard closed economy macro-finance specification. These economic linkages also help to explain the co-movement of yields in the US and UK Treasury bond markets. (C) 2009 Elsevier B.V. All rights reserved.

Item Type: Article
Copyright, Publisher and Additional Information: © 2010 ELSEVIER SCIENCE BV. This is an author produced version of a paper published in the JOURNAL OF BANKING & FINANCE. Uploaded in accordance with the publisher's self archiving policy.
Keywords: Macroeconomics, Spillover effects, Common shocks, Macro-finance model, Term structure, TERM STRUCTURE, INTEREST-RATES, INFLATION, Economics and Econometrics, Finance
Institution: The University of York
Academic Units: The University of York > Economics and Related Studies (York)
Depositing User: Repository Administrator York
Date Deposited: 26 Mar 2010 18:15
Last Modified: 10 Sep 2014 13:17
Published Version: http://dx.doi.org/10.1016/j.jbankfin.2009.09.006
Status: Published
Refereed: Yes
Related URLs:
URI: http://eprints.whiterose.ac.uk/id/eprint/10730

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