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Impact of Globalization on Macroeconomic Dynamics Using a Time-varying Bayesian VAR

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  • Georgiana Pleșa

Abstract

In the last two decades, advances in globalization have evolved remarkably and countries have become more integrated with the entire world. The implications of this process have attracted interest of researchers and monetary policy authorities. This paper provides an assessment of the impact of globalization on macroeconomic dynamics at the level of four representative Central Eastern European countries (Czechia, Hungary, Poland and Romania) between 2003Q2 and 2022Q4. The method proposed in this study is a time-varying vector autoregressive model with stochastic volatility estimated using the Metropolis-Hastings algorithm through Bayesian inference. The results of the impulse response functions suggest a slight decrease in inflation and an increase in economic activity for some of the analysed countries, after a positive shock in the degree of trade openness, a proxy used for the advance in globalization.

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  • Georgiana Pleșa, 2024. "Impact of Globalization on Macroeconomic Dynamics Using a Time-varying Bayesian VAR," Prague Economic Papers, Prague University of Economics and Business, vol. 2024(4), pages 380-413.
    • Handle: RePEc:prg:jnlpep:v:2024:y:2024:i:4:id:872:p:380-413
    DOI: 10.18267/j.pep.872
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    References listed on IDEAS

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    1. Jordi Galí, 2010. "Commentary: Inflation Pressures and Monetary Policy in a Global Economy," International Journal of Central Banking, International Journal of Central Banking, vol. 6(1), pages 93-102, March.
    2. Pierpaolo Benigno & Ester Faia, 2016. "Globalization, Pass-Through, and Inflation Dynamics," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 263-306, December.
    3. Jouchi Nakajima, 2011. "Time-Varying Parameter VAR Model with Stochastic Volatility: An Overview of Methodology and Empirical Applications," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 29, pages 107-142, November.
    4. de Mendonça, Helder Ferreira & Nascimento, Natalia Cunha, 2020. "Monetary policy efficiency and macroeconomic stability: Do financial openness and economic globalization matter?," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    5. Francesco Bianchi & Andrea Civelli, 2015. "Globalization and Inflation: Evidence from a Time Varying VAR," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 406-433, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    globalization; time-varying vector autoregressive; Bayesian estimation; inflation;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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