How do US credit supply shocks propagate internationally? A GVAR approach

Eickmeier, Sandra; Ng, Tim

doi:10.1016/j.euroecorev.2014.11.011

Cited by 196 publications

(204 citation statements)

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“…In the baseline specification I consider the effects of US monetary policy shocks identified by sign restrictions following the approach of Eickmeier and Ng (2011). Consider the global representation of the MCSGVAR model…”

Section: Identification Of Us Monetary Policy Shocksmentioning

confidence: 99%

Determinants of global spillovers from US monetary policy

Georgiadis

2016

Journal of International Money and Finance

271

127

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThis paper assesses the global spillovers from identified US monetary policy shocks in a global VAR model. US monetary policy generates sizable output spillovers to the rest of the world, which are larger than the domestic effects in the US for many economies. The magnitude of spillovers depends on the receiving country's trade and financial integration, de jure financial openness, exchange rate regime, financial market development, labor market rigidities, industry structure, and participation in global value chains. The role of these country characteristics for the spillovers often differs across advanced and non-advanced economies and also involves non-linearities. Furthermore, economies which experience larger spillovers from conventional US monetary policy also displayed larger downward revisions of their growth forecasts in spring 2013 when the Federal Reserve upset markets by discussing tapering off quantitative easing. The results of this paper suggest that policymakers could mitigate their economies' vulnerability to US monetary policy by fostering trade integration as well as domestic financial market development, increasing the flexibility of exchange rates, and reducing frictions in labor markets. Other policies-such as inhibiting financial integration, industrialisation and participation in global value chains-might mitigate spillovers from US monetary policy, but are likely to reduce long-run growth. helped economies to raise their potential growth similarly, capital market integration and financial openness allows economies to reap collateral benefits from financial globalisation Clearly, a completely closed economy will not experience any spillovers whatsoever, but is likely to grow more slowly in the long run. In these cases, the trade-offs should be carefully considered before any measures are taken.

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Section: Identification Of Us Monetary Policy Shocksmentioning

confidence: 99%

Determinants of global spillovers from US monetary policy

Georgiadis

2016

Journal of International Money and Finance

271

127

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“…Additionally, this shock is set to move the credit-to-gdp upward. The restrictions are similar to Eickmeier and Ng (2011). The assumed decline in the mortgage risk premium is intended to separates credit supply from credit demand factors (where the mortgage premium is assumed to widen).…”

Section: Bank Lending Shocksmentioning

confidence: 99%

“…Examples of theoretical work on the role of credit include Atta-Mensah and Dib (2008) and Christiano et al (2009). 2 In the empirical literature, interesting contributions on the role of credit supply shocks come from Busch et al (2010), Eickmeier and Ng (2011), Helbling et al (2011), Meeks (2012, Fornari and Stracca (2012) and Peersman and Wagner (2014). An key issue is the role and the relative importance of credit supply shocks and standard monetary policy shocks as identified by Musso et al (2011) for the US and the EU.…”

Section: Introductionmentioning

confidence: 99%

Credit cycles and real activity: the Swiss case

Bäurle

Scheufele

2018

Empir Econ

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper analyzes credit supply and demand shocks for the Swiss economy. Using a medium scale BVAR model we are able to take into account various interactions of housing prices, credit supply and demand, interest rates and real activity measures. To identify meaningful economic shocks, we used a combination of zero and sign restrictions. Generally, the empirical analysis implies that the effects of credit supply and demand shocks on real activity are limited, only playing a substantive role in specific episodes. Furthermore, the credit supply shocks (i.e. bank lending shocks and monetary policy shocks) explain a large fraction of housing price and credit fluctuations. Indeed, they tend to be more important for housing prices than housing demand shocks. There is further evidence that shocks related to credit supply, monetary policy shocks dominate bank lending shocks. For Switzerland as a small open economy it turns out to be very crucial to take into account foreign demand which is able to explain a substantial variation in real and financial variables. Terms of use: Documents in EconStor mayJEL classification: C11, C32, E30, E44, E51, E52

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“…de Waal et al (2013) show that a richer GVAR 3 GVAR models have, for instance, been used to analyze the international transmission of oil price shocks (Cashin et al, 2014), house price shocks (Cesa-Bianchi, 2013), credit supply shocks (Eickmeier and Ng, 2015), cost-push shocks (Galesi and Lombardi, 2013), financial stress shocks (Dovern and van Roye, 2014), monetary policy shocks (Feldkircher and Huber, 2015), liquidity shocks during the Great Recession of -2009(Chudik and Fratzscher, 2011, and for stresstesting of the financial sector (Castrén et al, 2010). For a more complete overview, see Chudik and Pesaran (2014).…”

Section: Related Literaturementioning

confidence: 99%

Does joint modelling of the world economy pay off? Evaluating global forecasts from a Bayesian GVAR

Dovern

Feldkircher

Huber

2016

Journal of Economic Dynamics and Control

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We analyze how modeling international dependencies improves forecasts for the global economy based on a Bayesian GVAR with SSVS prior and stochastic volatility. To analyze the source of performance gains, we decompose the predictive joint density into its marginals and a copula term capturing the dependence structure across countries. The GVAR outperforms forecasts based on country-specific models. This performance is solely driven by superior predictions for the dependence structure across countries, whereas the GVAR does not yield better predictive marginal densities. The relative performance gains of the GVAR model are particularly pronounced during volatile periods and for emerging economies.JEL classification: C53, E37, F47 Keywords: GVAR, global economy, forecast evaluation, log score, copula * Corresponding author: Florian Huber, Oesterreichische Nationalbank (OeNB), Phone: +43-1-404 20-5208. E-mail: florian.huber@oenb.at. We would like to thank Hans Manner and all participants of the AWI seminar as well as the OeNB seminar for helpful comments on earlier drafts of this paper. The opinions expressed in this paper are those of the authors and do not necessarily reflect the official viewpoint of the OeNB or of the Eurosystem.

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How do US credit supply shocks propagate internationally? A GVAR approach

Cited by 196 publications

References 83 publications

Determinants of global spillovers from US monetary policy

Determinants of global spillovers from US monetary policy

Credit cycles and real activity: the Swiss case

Does joint modelling of the world economy pay off? Evaluating global forecasts from a Bayesian GVAR

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