The transmission of international shocks to the UK. Estimates based on a time-varying Factor Augmented VAR

Liu, P., Mumtaz, H. and Theophilopoulou, A. 2014. The transmission of international shocks to the UK. Estimates based on a time-varying Factor Augmented VAR. Journal of International Money and Finance. 46, pp. 1-15.

TitleThe transmission of international shocks to the UK. Estimates based on a time-varying Factor Augmented VAR
AuthorsLiu, P., Mumtaz, H. and Theophilopoulou, A.
Abstract

The aim of this paper is to gauge the importance of foreign demand, supply and interest rate shocks on the UK economy and assess how their role has changed over time. To that end we devise a time-varying factor augmented VAR model that captures the relationship between 17 industrialised countries and the UK and accounts for any temporal evolution in this relationship. The response of UK macroeconomic variables to a foreign interest rate shock is estimated to have changed significantly since the early 1990s. International demand shocks play an important role in driving World and UK real activity, especially during the recent recession.

KeywordsInternational transmission, FAVAR, time-varying parameters
JournalJournal of International Money and Finance
Journal citation46, pp. 1-15
ISSN0261-5606
Year2014
PublisherElsevier
Accepted author manuscriptPAPERFEB2014.pdf
Digital Object Identifier (DOI)doi:10.1016/j.jimonfin.2014.03.004
Publication dates
Published13 Apr 2014
Published in printSep 2014
LicenseCC BY-NC-ND 4.0

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