We are grateful for valuable comments from two anonymous referees.
The Importance of Global Shocks for National Policymakers – Rising Challenges for Sustainable Monetary Policies
Article first published online: 27 JAN 2014
© 2014 John Wiley & Sons Ltd
The World Economy
Volume 37, Issue 8, pages 1101–1127, August 2014
How to Cite
Beckmann, J., Belke, A. and Czudaj, R. (2014), The Importance of Global Shocks for National Policymakers – Rising Challenges for Sustainable Monetary Policies. World Economy, 37: 1101–1127. doi: 10.1111/twec.12127
- Issue published online: 15 AUG 2014
- Article first published online: 27 JAN 2014
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 Q1 1984 to Q4 2012 for the G7 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.