International Macroeconomic-Financial Linkages and Policy Interactions in Time-Varying Multicountry Panel Setups: An Application to Emerging Economies

This paper provides new empirical insights in order to give a relevant contribution to the more recent literature on international macroeconomic-financial linkages when evaluating idiosyncratic shock transmission and investigating policy interactions in multicountry dynamic panel setups. Interdependence, commonality and heterogeneity are also identified in order to account for policy implications and suggestions for decision makers. An extension of a time- varying Structural Panel Bayesian Vector Autoregressive model is developed to jointly deal with model misspecification and unobserved heterogeneity problems. An empirical application among a pool of emerging market economies is conducted to describe the functioning and the performance of the methodology, with particular attention to the most recent recession and post-crisis consolidation. My evidence shows that, when formulating policies or forecasting, additional transmission channels and economic-institutional issues through which fiscal contractions and monetary policy regimes influence the dynamics of the GDP growth need to be accounted for in multicountry setups.