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Systemic Risk, Aggregate Demand, and Commodity Prices
Author: Mr. Dominique M. Guillaume and Kadir Tanyeri
Series:
IMF Working Papers
Volume/Issue:
Volume 2015: Issue 165
Language:
English
Publication Date:
20 Jul 2015
DOI:
https://doi.org/10.5089/9781513552545.001
ISBN:
9781513552545
ISSN:
1018-5941
Pages:
52
Keywords:
WP; Systemic risk; Financial linkages; Capital flows; Global imbalances Commodity prices; country risk risk premium; world output gap; trade balance gap; premium shock; country output gaps; Return on investment; Output gap; Trade balance; Food prices; Global; East Asia; Europe
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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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The paper presents a global model with systemic and country risks, as well as commodity prices.We show that systemic risk shocks have an important impact on world economic activity, with the busts in world output gap corresponding to unobserved systemic risk associated with major financial events. In addition, systemic risk shocks are shown to be important drivers of output gaps while country risk premium shocks can have important effects on the trade balance. Commodity prices, in particular the price of oil, are shown to be demand driven. The model performs well at one- and four-quarter horizons compared to a survey of analysts' forecasts. In addition, systemic risk shocks explain a large share of the forecast variance for the world output gap, country output gaps, the price of oil, and country risk premiums. The importance of systemic risk shocks lends support for financial surveillance with a systemic focus.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund

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