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Global Monetary Policy Shocks in the G5: A SVAR Approach

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Author Info
Joao Miguel Sousa () (Banco de Portugal)
Andrea Zaghini () (Banca d'Italia and CFS)

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Abstract

The paper constructs a global monetary aggregate, namely the sum of the key monetary aggregates of the G5 economies (US, Euro area, Japan, UK, and Canada), and analyses its indicator properties for global output and inflation. Using a structural VAR approach we find that after a monetary policy shock output declines temporarily, with the downward effect reaching a peak within the second year, and the global monetary aggregate drops significantly. In addition, the price level rises permanently in response to a positive shock to the global liquidity aggregate. The similarity of our results with those found in country studies might supports the use of a global monetary aggregate as a summary measure of worldwide monetary trends.

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Publisher Info
Paper provided by Center for Financial Studies in its series CFS Working Paper Series with number 2006/30.

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Length: 27 pages
Date of creation: 20 Dec 2006
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Handle: RePEc:cfs:cfswop:wp200630

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Related research
Keywords: Monetary Policy; Structural VAR; Global Eco;

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
F01 - International Economics - - General - - - Global Outlook

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  9. João Sousa & Andrea Zaghini, 2004. "Monetary policy shocks in the euro area and global liquidity spillovers," Working Paper Series 309, European Central Bank. [Downloadable!]
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  10. Benoit Mojon & Gert Peersman, 2001. "A VAR description of the effects of monetary policy in the individual countries of the Euro area," Working Paper Series 092, European Central Bank. [Downloadable!]
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  12. Lance J. Bachmeier & Norman R. Swanson, 2005. "Predicting Inflation: Does The Quantity Theory Help?," Economic Inquiry, Oxford University Press, vol. 43(3), pages 570-585, July. [Downloadable!] (restricted)
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  14. Paul De Grauwe & Magdalena Polan, 2005. "Is Inflation Always and Everywhere a Monetary Phenomenon?," Scandinavian Journal of Economics, Blackwell Publishing, vol. 107(2), pages 239-259, 06. [Downloadable!] (restricted)
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  18. Canova, Fabio, 2003. "The Transmission of US Shocks to Latin America," CEPR Discussion Papers 3963, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michael Woodford, 2007. "Globalization and Monetary Control," NBER Working Papers 13329, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Ansgar Belke & Walter Orth, 2007. "Global Excess Liquidity and House Prices - A VAR Analysis for OECD Countries," Ruhr Economic Papers 0037, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
  3. Joao Sousa & Andrea Zaghini, 2007. "Monetary Policy Shocks in the Euro Area and Global Liquidity Spillovers," Temi di discussione (Economic working papers) 629, Bank of Italy, Economic Research Department. [Downloadable!]
    Other versions:
  4. Belke, Ansgar & Orth, Walter & Setzer, Ralph, 2008. "Liquidity and the dynamic pattern of price adjustment: a global view," Discussion Paper Series 1: Economic Studies 2008,25, Deutsche Bundesbank, Research Centre. [Downloadable!]
  5. Rasmus Rüffer & Livio Stracca, 2006. "What is global excess liquidity, and does it matter?," Working Paper Series 696, European Central Bank. [Downloadable!]
    Other versions:
  6. Mirdala, Rajmund, 2009. "Interest rate transmission mechanism of monetary policy in the selected EMU candidate countries," MPRA Paper 14072, University Library of Munich, Germany, revised Jul 2009. [Downloadable!]
    Other versions:
  7. Michael Woodford, 2007. "Globalization and Monetary Control," NBER Chapters, in: International Dimensions of Monetary Policy National Bureau of Economic Research, Inc. [Downloadable!]
  8. Ansgar Belke & Walter Orth & Ralph Setzer, 2008. "Sowing the seeds for the subprime crisis: does global liquidity matter for housing and other asset prices?," International Economics and Economic Policy, Springer, vol. 5(4), pages 403-424, December. [Downloadable!] (restricted)
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