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Empirical analysis of interest rate channel between Taiwan and U.SChen, Wen-ren 18 June 2012 (has links)
This paper applies a Factor-augmented error correction model proposed by Banerjee. A, Marcellino. M¡]2009¡^to measure the impact of the United States¡¦ monetary policy on Taiwan.
The FECM model has the following advantages. First, it has refined the dynamic factor model, since it allows us to include the error correction terms into equation. Second, we can improve FAVAR model¡¦s shortcomings, the common factor lack of economic interpretation, by using the method of Belviso. F, Milani. F¡]2006¡^. Third, the cointegration can analyze long-run and short-run dynamics of non-stationary variables. Forth, we propose the generalized impulse respone to analyze the FECM model, it doesn¡¦t require orthogonalization of shocks and is invariant to the ordering of the variables.
Finally, we indeed prove the interest rate channel does exist in Taiwan and United States through the method of FECM model.
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