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The Importance of Global Shocks for National Policymakers – Rising Challenges for Sustainable Monetary Policies
Author(s) -
Beckmann Joscha,
Belke Ansgar,
Czudaj Robert
Publication year - 2014
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12127
Subject(s) - economics , monetary policy , commodity , market liquidity , monetary economics , macroeconomics , globalization , international economics , finance , market economy
This paper analyses the importance of global shocks for the global economic developments and national policymakers from a novel perspective. On the one hand, we examine whether global factors convey additional information about monetary conditions not summarised by national aggregates. More specifically, we keep an eye on the question whether domestic monetary policies have become less effective in the wake of financial globalisation. We adopt a FAVAR framework to derive structural shocks on a worldwide level and their impact on other global and also national variables. We estimate our macromodel using quarterly data from Q 1 1984 to Q 4 2012 for the G 7 countries plus the euro area. According to our results, global liquidity shocks significantly influence the global economy at the commodity price level. However, some other common shocks originating from house prices and GDP play a role at the global level as well.