February 15th, 2015
from the Dallas Fed
The Globalization and Monetary Policy Institute's mission is promoting research that helps the public better understand how globalization affects the conduct of U.S. monetary policy. Determining the consequences of trade and financial globalization is challenging. Understanding macroeconomic interdependence is necessary to fully comprehend globalization's consequences. This touches on a number of fields, including theoretical open economy macroeconomic research, empirical data-driven applied research and development of new econometric tools to handle large international datasets.
This article examines how my work has contributed to the institute's mission, particularly to our understanding of macroeconomic interdependence. This essay is in three parts. The first reviews how theoretical open economy macroeconomic modeling helps assess interdependence. Specifically, it identifies shortcuts used in the literature that may be misleading. The second part summarizes contributions regarding development of new econometric tools for modeling interdependent economies, including use of the global vector autoregressive (GVAR) approach. In the final part, I review applications developed with the GVAR approach, a modeling technique widely used to measure how economic shocks affect interdependent economies.