جهانی شدن و سیاست پولی -یک تجزیه و تحلیل FAVAR برای G7 و منطقه یورو

We analyze the importance of global shocks for the global economy and national policy makers. More specifically, we investigate whether monetary policy has become less effective in the wake of financial globalization. We also examine whether there is increasing uncertainty for central banks due to globalization-driven changes in the national economic structure. A FAVAR framework is applied to derive structural shocks on a worldwide level and their impact on other global and also national variables. We estimate our macro model using quarterly data from Q1 1984 to Q4 2007 for the G7 countries plus the euro area. According to our results, global liquidity shocks significantly influence the global economy and various national economies. However, some other common shocks originating from house prices and GDP play a role at the global level as well. These results prove to be robust across different specifications.

There has been much progress in global economic integration has been proceeding in the years before Lehman, both in goods and financial markets. Empirical realisations of macroeconomic variables in one economy should thus to an increasing extent reflect empirical patterns manifesting themselves in the remaining parts of the world. As a matter of fact, even empirical properties of real estate markets, commonly considered to be a national phenomenon, have turned to be increasingly correlated across countries. As indicated by the latest events, strong hikes in residential property prices in the US and some parts of Europe were followed by rapid declines. As national economies become more inter-connected, a thorough understanding of the global economy and its effects on domestic economic activity is crucial. Quantifying the time pattern and the order of magnitude of international spillovers is particularly relevant, because it enables us to better assess macroeconomic developments in one specific country or region. The rapid speed of globalization on goods and financial markets is beneficial, but may also have drawbacks for national policymakers. International spillovers and global shocks can limit the autonomy of national monetary and fiscal policy. For example, international capital flows are influencing domestic monetary conditions, thereby curtailing the ability of central banks to influence national real activity and prices. The questions we are investigating in this contribution are therefore threefold. First, what are the major shocks and transmission channels which are driving the global economy? Second, to what extent have global factors affected the determination of key macroeconomic variables in the G7 countries?1 We quantify the speed and size of spillovers that occur following a shock originating from the global economy. Third, is there increasing uncertainty for monetary policy in the wake of globalization and has national monetary policy become less effective when trying to steer national liquidity? The remainder of the paper proceeds as follows. In Section 2, we describe the differences and unique contributions compared to the previous research. In Section 3, we take a global perspective and move toward a description of our data and variable set. In Section 4, we explain the Factor Augmented Vector Autoregression (FAVAR) approach. In Section 5, we display the results of our estimation exercises and also of some structural break tests and a couple of robustness checks. Section 6 concludes

In this contribution, we have investigated whether there is increasing uncertainty for monetary policy in the wake of globalization and whether central banks have become less effective in influencing national liquidity conditions. In brief, our answer to both questions is a clear “yes”. Our findings are important from different perspectives. At least four main conclusions emerge from our analysis. First, a domestic perspective neglects important information regarding monetary policy environment embedded in a global liquidity perspective. Second, the impact of global liquidity on variables such as domestic interest rates might counteract the usual transmission of monetary policy decisions. As a consequence, the influence of central banks on domestic money supply is weakening. Third, an important overall implication which emerges from the first two points is that national monetary policy is faced with an increasing degree of uncertainty and might feel forced to act according to the so-called Brainard conservatism principle. Fourth, the old question of optimal monetary policy among interdependent economies powerfully reappears on the surface. In the following, we elaborate a bit more on the third and the fourth policy conclusion. Our third policy conclusion is that national monetary policy is faced with an increasing degree of uncertainty. Needless to say, monetary policy always operates in an environment of uncertainty. Sometimes, for instance, it is not unambiguously clear for central banks how to interpret new incoming macroeconomic data. Moreover, there are uncertainties about the concise monetary transmission mechanism. However, our empirical results indicate that the fog of uncertainty has indeed become denser due to structural changes in the transmission process between global and national variables. Among other common forces, this seems to be also true for global liquidity, which has an increasingly stronger effect on monetary aggregates in some but not all countries. This “Knightian uncertainty” or model uncertainty may have significant implications for the behavior of central banks. According to the Brainard conservatism principle, uncertainties about major model parameters can change the incentives facing central bankers, thereby leading them to use their policy instruments less vigorously. The reason is that uncertainty about the elasticity between global and national money is amplified into the economy the more monetary policy reacts to this relation. Since the Brainard conservatism introduces a motive for caution in optimal central bank behavior, financial globalization and its corresponding structural changes may be important reasons for central banks not fighting against strong rises in monetary and credit aggregates in the last few years. In contrast, Borio and Filardo (2007) explain excessive monetary policy accommodation not by rising uncertainties but by favorable supply side developments triggered by globalization. This in turn dampened inflationary pressure and allowed the reduction of short-term interest rates to exceptionally low levels. If structural breaks and the higher potential for making mistakes make up for the underlying reasons for too prudent central banks behavior, it is not clear whether this will change in the years to come. Both financial markets and the global economy may undergo even more profound modifications after the unprecedented financial crisis.Our fourth policy conclusion concerns the question of the optimal design of monetary policy among interdependent economies. Should open “spillover-driven”economies adopt rules designed to fit specific features of more open and more closed economies? This is old wine in new bottles and is closely related to the popular debates about inward-looking versus outward-looking monetary policy and commitment versus discretion, respectively. The Chicago School saw a flexible exchange rate as a way of insulating domestic developments from foreign economic disturbances, including foreign monetary policy. There is no need, they argued, for central banks to coordinate their monetary policies. All that is needed is flexible exchange rates. Does the existence of global liquidity mean that we need coordination or even a world central bank? International coordination might be needed to keep global liquidity shocks as low as possible, since structural changes between global and national liquidity cannot be influenced by central banks. One reason is that monetary competition between central banks might cause a free-rider problem without any coordination. If a national central bank, let's say the Bank of Japan, is inclined to conduct a lax monetary policy, liquidity spillovers occur and foreign central banks have to bear parts of the burden. Another reason is that there may be multiplier effects that occur when several countries all turn their monetary policy in the same direction. The crucial issue is how best to prevent further excessive, synchronized shifts in the world money stock. However, policy coordination would bring greater predictability, but at the risk of all countries simultaneously choosing the wrong set of policies. International policy coordination would merely elevate to the global level the shortcomings that are now apparent at the domestic level. While we have come up with some additional empirical evidence supporting the view that monetary policy has become less effective as a consequence of globalization, the question remains unsolved whether central banks need to adapt their monetary policy strategies in order to cope with the challenges of globalization. We leave this task for further research.