How Trade Composition Affects Sensitivity to Foreign Shocks: Applying a Global VAR Model to Ukraine

Oleksandr Faryna () and Heli Simola
Additional contact information
Oleksandr Faryna: National Bank of Ukraine

Visnyk of the National Bank of Ukraine, 2019, issue 247, 4-18

Abstract: This paper studies the transmission of foreign output shocks to real activity in Ukraine through international trade. We employ a global vector auto regressive (GVAR) model that captures about 80% of the world economy and incorporates time-varying trade and financial weights. According to our estimates, a mild recession in the US of a 1% drop in output generates a substantial recession in Ukraine of about 2.2%. A similar drop of output in the euro area and Russia translates to a drop in output of about 1.7% in Ukraine. Finally, the same drop of output in CEE, China, or the CIS leads to an output decline of about 0.4% in Ukraine. Meanwhile, Ukraine’s response to euro area output shock has been steadily increasing over the last couple of decades due to changes in global trade flows. Ukraine’s sensitivity to shocks in the US and euro area is notably strengthened by indirect trade effects, while the response to shocks from emerging economies, i.e., China, CEE, the CIS, and partially Russia, is mainly determined by bilateral trade linkages.

Keywords: Ukraine; global VAR; foreign shocks; trade compositions (search for similar items in EconPapers)
JEL-codes: C32 E32 F42 F43 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
https://journal.bank.gov.ua/en/article/2019/247/01 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ukb:journl:y:2019:i:247:p:4-18

DOI: 10.26531/vnbu2019.247.01

Access Statistics for this article

More articles in Visnyk of the National Bank of Ukraine from National Bank of Ukraine Contact information at EDIRC.
Bibliographic data for series maintained by Research Unit ().