The Importance of Global Shocks for National Policymakers: Rising Challenges for Central Banks

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Apart from a common liquidity driving force, global demand and house price
shocks prove to be important as well. For example, a sudden change in the global GDP
disturbance leads to temporary higher inflation from quarter two to quarter eleven.
Significant responses of common factors can also be found after a global house price
shock. In contrast, the common short-term interest rate is not a driving but a driven force
in the global economy. For example, an interest rate shock does not trigger any
significant response of the common house price factor. Instead, a sudden change in the
disturbance of residential property prices leads to an increasing short-term interest rate.
The same insignificant results are found for the inflation factor and commodity and share
prices (see Table A1 for more results).

Chart 2 - Impulse response analysis in SFAVAR (various global shocks)

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