Essays on Empirical Investigation of Global Economic Interdependence
Open Access DepositedI employ a Difference-in-Differences (DiD) approach to evaluate the impact of the Global Financial Crisis of 2008 (GFC) on the international co-movements of inflation across various countries. I characterize international co-movements of inflation in individual countries by applying TVCC. Next, I implement the DiD models on a panel dataset to analyze the effects of the GFC on TVCC and to determine whether IFI and economic openness capture these effects in countries that were most affected by the GFC. In these countries, inflation co-movements became less pronounced after the crisis, while their total trade volumes had a positive influence on their inflation co-movements following the crisis. The empirical findings are crucial for policy formulation and portfolio optimization.
however, they vary significantly across different economic groups. Through regression analysis, I identify the factors that drive the inflation rates of multiple economies to move in tandem in my models. These factors are significantly related to global commodity prices, financial conditions in financial centers, and macroeconomic fundamentals in major economies. Moreover, sub-sample analysis reveals noticeable changes in the international co-movements of inflation and factor identification after the Global Financial Crisis of 2008 (GFC). This empirical finding helps us understand the underlying forces driving these co-movements. Severe disruptions in global financial markets and shifts in monetary policy in major economies following these disruptions could be considered underlying forces. My empirical analysis results help individuals balance external and domestic influences in inflation forecasting, monetary policy formulation, international trade strategy development, and currency risk management. Chapter 2
I use dynamic latent factor models to measure inflation synchronization among 100 economies. Inflation co-movements are widespread
Chapter 1
I employ a dynamic conditional correlation-generalized autoregressive conditional heteroscedasticity (DCC-GARCH) model to estimate the time-varying correlation coefficients (TVCCs) between domestic and global inflation rates. I then apply panel autoregressive distributed lag (ARDL) models to estimate the impacts of international financial integration (IFI) on the international inflation co-movements across different country groups. I find that IFI has varying effects across these groups, with the heterogeneity in IFI effects considered a factor driving the divergence in inflation co-movements among these groups. The effects of IFI could be related to its categories and the characteristics of countries, such as levels of development, capital controls, and geographical locations. Investigating these heterogeneous effects of IFI on inflation co-movements is vital for enhancing macroeconomic stability, tailoring effective policies, and optimizing investment portfolios in our increasingly interconnected world. Chapter 3
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