Title Can key interest rates decrease output gaps? /
Authors Stavytskyy, Andriy ; Kharlamova, Ganna ; Giedraitis, Vincentas Rolandas ; Osetskyi, Valeriy ; Kulish, Viktoriia
DOI 10.21511/imfi.17(3).2020.16
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Is Part of Investment management and financial innovations.. Sumy : LLC CPC Business Perspectives. 2020, vol. 17, iss. 3, p. 205-218.. ISSN 1810-4967. eISSN 1812-9358
Keywords [eng] Europe ; Financial and monetary policy ; Fiscal policy ; GDP gap ; Japan ; USA ; VAR model
Abstract [eng] The difference in the GDP levels is crucial for the macroeconomic forecasting to develop adequate and supportive fiscal and monetary policies. Most mismeasurements under current geoeconomics challenges can be explained by the difficulty in predicting recessions and the overestimation of the economy's potential capacity. The research aims to consider the GDP gap's effectiveness for the possible forecasting of the monetary policy, particularly the central bank's interest rate. The study uses quantitative methods, particularly VAR modeling. The VAR model is chosen as a proven useful tool for describing the dynamic behavior of economic time series and forecasting. The data sample is chosen as Eurozone, the United States, and Japan. The similarity is detected on output gaps implementation in the considered states; however, the variety in the responses to the financial crisis is revealed. This difference is due to the different sensitivity of economies on the impact of monetary instruments. In particular, the Japanese economy has a relatively low level of sensitivity to changes in monetary instruments. In terms of the reactions of central banks to the current economic crisis caused by COVID-19, then due to the global lockdown and the incredible decline in economic activity, almost all countries are in a situation of negative GDP gap according the paper's approach. However, the measures to mitigate it will vary in different states.
Published Sumy : LLC CPC Business Perspectives
Type Journal article
Language English
Publication date 2020
CC license CC license description