World shocks, world prices, and business cycles: An empirical investigation

Andrés Fernández, Stephanie Schmitt-Grohe and Martín Uribe ()

Journal of International Economics, 2017, vol. 108, issue S1, S2-S14

Abstract: SVAR models that include a single world price (such as the terms-of-trade) predict that world shocks explain a small fraction of movements in domestic output (typically less than 10%). This paper presents an empirical framework in which multiple commodity prices transmit world disturbances. Estimates on a panel of 138 countries over the period 1960–2015 indicate that world shocks explain on average 33% of output fluctuations in individual economies. This figure doubles when the model is estimated on post 2000 data. The findings reported here suggest that one-world-price specifications significantly underestimate the importance of world shocks for domestic business cycles.

Keywords: World shocks; Commodity prices; Business cycles (search for similar items in EconPapers)
JEL-codes: F41 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (122)

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Related works:
Working Paper: World Shocks, World Prices, and Business Cycles: An Empirical Investigation (2017)
Chapter: World Shocks, World Prices, and Business Cycles: An Empirical Investigation (2016)
Working Paper: World Shocks, World Prices, and Business Cycles: An Empirical Investigation (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:108:y:2017:i:s1:p:s2-s14

DOI: 10.1016/j.jinteco.2017.01.001

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