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Archives of Business Research – Vol. 10, No. 7

Publication Date: July 25, 2022

DOI:10.14738/abr.107.12731.

Özker, A. N. (2022). Recent Deflection Effects of Macro Components in G7 Countries and Contractionary Monetary Expansion

Fact. Archives of Business Research, 10(7). 131-147.

Services for Science and Education – United Kingdom

Recent Deflection Effects of Macro Components in G7 Countries

and Contractionary Monetary Expansion Fact

Ahmet Niyazi Özker

Bandirma Onyedi Eylul University, Faculty of Economics and

Administrative Sciences, Public Finance Department 10200-TURKEY

ORCID ID: 0000-0001-5313-246X

ABSTRACT

This study discussed the standard criteria points that constitute the reasons for

monetary expansion, primarily based on seven countries representing the G7

countries, this expansion in the monetary base brought up a structural

relationship model. The fact that frequently brought up the macro fluctuations has

been a crucial place as interest rates, unemployment rates and exchange rates

variability as the main macro components recently. The effects of these

components on economic growth have also provided an important justification for

evaluating their recent significant deviations. It is seen that the commonwealth of

wealth and economy of the G7 countries in the world constitutes approximately 68

per cent. In this respect, all kinds of targets for economic growth also represent a

structure that targets global trade and global trade at significant scales to national

income contribution values, albeit nominally. This case also shows why a balanced

policy towards increasing interest rates in the recent period and an interest policy

compatible with global exchange rate policies are frequently kept on the agenda.

This current approach has caused different monetary policies to come to the fore,

especially in these countries with a high level of wealth. Essential goals have

emerged to reduce costs and turn the growing monetary base into a seigniorage

income. These targets pushed the scale effect concerning monetary expansion

based on these macro components to an economic growth-based projection.

Key Words: G7 Countries, Macro Dynamics, Nominal and Real Interest Rates, Monetary

Base, Real Balance.

JEL Codes: E42, E43, E52.

INTRODUCTION

The recent macroeconomic deviations, especially the mutual influence level, created

variations in macroeconomic values arising from the factors related to the expansion of the

monetary base, which has also been an essential topic of discussion in the agenda of the G7

countries. Especially the macroeconomic components create a different level of influence than

expected from neo-classical liberal policies together with monetary expansion in developed

G7 countries, and it is often understood that they have an effect on the basis that monetary

targets. In the evaluation of the short and long-term effects of monetary expansion, the real

scale deviations of real money balances on the GDP are included in the agenda of almost every

country representing the G7 countries as a significant monetary and fiscal policy phenomenon

[1]. As the G7 countries, Canada, France, Germany, Italy, Japan, the United Kingdom, the

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Archives of Business Research (ABR) Vol. 10, Issue 7, July-2022

Services for Science and Education – United Kingdom

United States, and the European Union are directly considered part of the G7 countries. On the

other hand, the critical developments regarding monetary expansion in the European Union

and the recent preferences of EU countries to implement tight monetary policies have also

laid the groundwork for the issue to be defined with a monetarist paradox process of

increasing interest rates [2]. The perception of this phenomenon as a balance problem in the

"EU Monetary Union" poses an actual problem for the G7 countries to avoid these monetary

policies. In this context, any monetary expansion approach with different values means

differences in the level of impact of macro components at the global level in a process where

the financial targets of countries are different from each other. Therefore, these deviations

necessitated a meaningful analysis that frequently brings up the scale effect of some macro

components, primarily based on developed G7 countries. One of the essential macro features

for the G7 countries is that each component in question has created a different scale effect at

different scales than the other. For the G7 nations, the expansion in the monetary base is also

expressed by the infrastructure, which is a direct monetary policy, national income

contribution values and all kinds of cost increases that may arise concerning unemployment

[3].

Significant academic analysis supports the G7 countries that the monetary expansion

phenomenon will create a horizon that affects or differentiates inflation expectations in the

direction of price increases. But, on the other hand, it is observed that an inflationary risk

aversion tendency has also become a factor that can have a negative impact on both the

financial sector and the capital markets in the direction of increased risk premiums and

interest rates [4]. It is also understood that among the securities, especially those with fixed

income, they focus on the short term with approaches to increase interest rates and bring

high-interest discussions to the schedule often. In addition, it is essential that trying to

prevent the increase in unemployment through monetary expansion also takes place in the

process as another indicator. This fact, a possible price change policy, where inflation

expectations are always negatively affected, makes it inevitable to take part in the process

frequently [5]. However, the fact that possible inflationary values always occur with possible

changes, especially economic macro deviations, creates a strong approach trend for G7

countries, which aim for more dynamic economic growth and will prefer low exchange rates

and high-interest policies in the process of overvalued money. Regardless of its financial cost,

the economic-oriented nature of monetary expansion in G7 countries is understood by the

level of influence of macro components that may arise for each country. These analyses are

especially meaningful for the G7 countries with the periodic analysis of the percentage of

price increases in an inflationary environment, with the real different scale effects, with the

structure of a scale effect position in which unemployment rates [6].

LITERATURE REVIEW

Significant studies have been carried out recently on the phenomenon of monetary expansion

as a result of these studies, and it has been seen that the relationship between the

determination of the scale effect of macro variables and monetary exposure has been the

subject of elemental analyses. Besides, evaluating the monetary expansion phenomenon

based on developed countries has also revealed some significant findings, especially with

OECD and European Union-based studies. As a literature review on our subject, it is possible

to follow the critical recent discoveries of these studies in Table 1 by listing them as follows:

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Özker, A. N. (2022). Recent Deflection Effects of Macro Components in G7 Countries and Contractionary Monetary Expansion Fact. Archives of

Business Research, 10(7). 131-147.

URL: http://dx.doi.org/10.14738/abr.107.12731

Table 1. The Literature Review on The Monetary Expansion

Person/Institution

Doing the Study

The Name of

Study

Location/Institutio

n Where the Study

Was Conducted

Objective of The

Evaluation and Findings

[7] Andrew Baker

(2008)

Global Monitor:

The Group of

Seven

New Political

Economy, Vol. 13, No.

1, March 2008.

The G7 countries discussed

economic development and

the new financial change

policies and obligations of

these countries for monetary

expansion policies were

emphasized.

[8] The

International

Monetary Fund

(IMF), 2010.

Global Economic

Prospects and

Policy Challenges

Group of Seven- Meetings of G-7

Finance Ministers

and Central Bank

Governors February

5−6, 2010 Iqaluit,

Canada

Institutional characteristics of

monetary expansion, periodic

interest effects and financial

projections for the future were

evaluated.

[9] John B. Taylor

(2014)

International

Monetary Policy

Coordination:

Past, Present and

Future

Bank for

International

Settlements (BIS)

Working Papers No.

437 Monetary and

Economic

Department

This article has discussed and

analysed the structural

political change process of the

monetary expansion related to

the global monetary policy and

the international monetary

policy coordination related to

the monetary system.

[10] Gregory T.

Polgar, David A.

Walker (2015)

G7, Central

Banking, And U.S.

Interest Rates

Business

Perspectives: Banks

and Bank Systems,

Volume 10, Issue 1,

2015

This study presents a

structural analysis model in

which the effects of important

macroeconomic variables in

overcoming the recession

process in G7 countries are

tested. It put forth the

volatility of interest rates and

monetary policies against to

inflation reveal the level of

efficiency.

[11] Oxford

Economics (2019)

Global Economic

Model

Oxford Economics,

2019 July Oxford,

U.K.

An evaluation has been made

in which the reasons for

monetary expansion,

especially in terms of EU

countries, of a structure for

the search for a global

monetary model, are

discussed.