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Foreign Entanglements: Estimating the Source and Size of Spillovers Across Industrial Countries
Author: Mr. Tamim Bayoumi and Mr. Andrew J Swiston
Series:
IMF Working Papers
Volume/Issue:
Volume 2007: Issue 182
Language:
English
Publication Date:
01 Jul 2007
DOI:
https://doi.org/10.5089/9781451867466.001
ISBN:
9781451867466
ISSN:
1018-5941
Pages:
52
Keywords:
WP; Euro area; area shock; U.S.-rest of the world covariance
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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VARs of real growth since 1970 are used to estimate spillovers between the U.S., euro area, Japan, and an aggregate of small industrial countries, which proxies for global shocks. U.S. and global shocks generate significant spillovers, while those from the euro area and Japan are small. This paper also calculates the standard errors of impulse-response functions including uncertainty over the proper Cholesky ordering. Extensions adding real net exports, commodity prices, and financial variables indicate that financial effects dominate spillovers. The results by subperiod underline the importance of the great moderation in U.S. output fluctuations and associated financial stability in lowering output volatility elsewhere.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund