The Effect Of Monetary Shocks On Macroeconomy: Econometrical Analysis

The impact of monetary shock, including domestic monetary shock and foreign monetary shock, on some domestic main macroeconomic variables is analyzed in this dissertation. The impact of domestic monetary shock and foreign monetary shock is separately analyzed. The impact of domestic monetary shock on domestic main macroeconomic variables is analyzed at first; then the impact of foreign monetary shock on domestic main macroeconomic variables is analyzed. Output, price, interest rate, exchange rate and welfare are chosen as the five domestic main macroeconomic variables. Ten countries'data are chosen in this dissertation. Seven countries are emerging markets including China, Brazil, Mexico, Venezuela, India, Philippines, and South Africa. Three are developed countries, including Japan, United States of America and United Kingdom. The impact of domestic monetary shock on domestic output, price, interest rate, exchange rate and welfare is analyzed using the ten countries'data. Then the impact of foreign monetary shock on domestic output, price, interest rate, exchange rate and welfare is analyzed using the seven emerging markets'data. The monetary shocks from Japan, United States of America and United Kingdom are chosen as the foreign monetary shock faced by seven emerging markets. From the existing models, we can get the result theoretically that the domestic monetary shock and foreign monetary shock have impact on output, price, interest rate, exchange rate and welfare.The VAR is used as the major econometric method to analyze this problem. When the impact of domestic monetary shock on domestic output, price, interest rate, exchange rate and welfare is analyzed via VAR, each of these five variables is put together with monetary shock variable and government spending shock variable. When the impact of foreign monetary shock on domestic output, price, interest rate, exchange rate and welfare is analyzed via VAR, each of these five variables is put together with Japanese monetary shock variable, United States of America monetary shock variable and United Kingdom monetary shock variable. The shock response figures and shock decomposition tables from the impact of domestic monetary shock and foreign monetary shock on domestic output, price, interest rate, exchange rate and welfare are gotten via VAR analysis.Via the VAR analysis from the ten countries'data, the result of dissertation shows that domestic monetary shock has no evident positive impact or negative impact on domestic output, price, interest rate, exchange rate and welfare; positive impact, negative impact and no impact appear alternatively, and the results from ten countries'data are different. Also the result of the impact of foreign monetary shock from Japan, United States of America and United Kingdom on the variables in the emerging markets has no evident positive impact or negative impact via VAR analysis, and the result from different countries'data are different as well.