International Monetary Policy Coordination through Communication: Chasing the Loch Ness Monster
International Journal of Central Banking (Forthcoming)
22 Pages Posted: 21 Dec 2016 Last revised: 13 May 2018
Date Written: May 10, 2018
Abstract
International monetary coordination has become a major policy argument since the global financial crisis. There is very little evidence of coordination among central banks. Blanchard et al. (2013) even calls policy coordination “… the Loch Ness monster: much discussed but rarely seen.” In this paper, we chase the Loch Ness monster and empirically examine the existence of international monetary policy coordination. We use the BIS meetings to identify coordination empirically. We investigate whether the increased means of communication between governors of central banks have any effect on the correlation of monetary policy decisions. We conduct several empirical analyses to investigate whether monetary policy decisions of the central banks that the governor participates to the GEM are more synchronized compared to outsiders. Using different econometric specifications, we find that GEM participants have significantly higher correlation of monetary policy actions, a sign for greater coordination.
Keywords: Monetary Policy, Coordination, Syncronization, BIS Meetings
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