Impact of globalization on macroeconomic dynamics using a time-varying Bayesian VAR

In the last two decades, advances in globalization have evolved remarkably and countries have become more integrated with the entire world. The implications of this process have attracted interest of researchers and monetary policy authorities. This paper provides an assessment of the impact of globalization on macroeconomic dynamics at the level of four representative Central Eastern European countries (Czechia, Hungary, Poland and Romania) between 2003Q2 and 2022Q4. The method proposed in this study is a time-varying vector autoregressive model with stochastic volatility estimated using the Metropolis-Hastings algorithm through Bayesian inference. The results of the impulse response functions suggest a slight decrease in inflation and an increase in economic activity for some of the analysed countries, after a positive shock in the degree of trade openness, a proxy used for the advance in globalization.