Asymmetries in the international spillover effects of monetary policy: Based on TGVAR model

Abstract

Based on the TGVAR framework, this study examined the asymmetrical global spillover effects in the major areas and countries. Our analysis makes the case that the asymmetries in monetary policy are primarily caused by heterogeneity in monetary policy tool shocks, regional and macroeconomic target responses, and disparities in economic conditions and international position among nations. Our findings demonstrate that emerging economies are more vulnerable to monetary policy spillover effects than advanced economies for both quantity-based and price-based monetary policies. Our research also reveals that while the spillover effects on inflation varied considerably, the effects on real GDP are more closely impacted. Without countermeasures, a shock resulting in a uniform cutting of short-term interest rates might cause a recession in the majority of economies while a shock resulting in a rise in the broad money supply could trap some economies in stagflation.

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