Trade Linkages and Output-Multiplier Effects: a Structural VAR Approach with a Focus on Asia

Tilak Abeysinghe () and Kristin Forbes ()

Review of International Economics, 2005, vol. 13, issue 2, pages 356-375

Abstract: This paper develops a structural VAR model to measure how a shock to one country affects other countries' GDP. It uses trade linkages to estimate the multiplier effects as a shock is transmitted through output fluctuations and introduces a new specification strategy that reduces the number of unknowns and allows cross-country relationships to vary over time. This model is used to examine the impact of shocks to 11 Asian countries, the US, and the rest of the OECD. Impulse-response matrices suggest that these multiplier effects are large and can transmit shocks in very different patterns than predicted from a bilateral-trade matrix. Copyright Blackwell Publishing Ltd 2005..

Date: 2005
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