Macroeconomic Transmission of Eurozone Shocks to Emerging Economies

Bilge Erten

International Economics, 2012, issue 131, 43-70

Abstract: This paper analyzes the robustness of emerging economies growth performance to a number of external demand shocks using a Bayesian vector autoregressive (BVAR) model with informative priors on the steady state. We show that more than Vfty percent of the variation in real GDP growth of Latin American emerging economies is explained by external factors, while it is slightly less than Vfty percent for emerging Asia and China. Conditional forecasts of different scenarios indicate that a deepening of the Eurozone recession would create a severe and persistent contraction for emerging economies, depending on the response of the U.S. growth to this shock. Finally, forecasts suggest that a sharp slowdown in China’s growth would have a signiVcant negative impact on emerging economies’ growth, and that the Latin American countries would be more severely hit than the Asian ones.

Keywords: Eurozone Recession; Transmission of Shocks; Bayesian vector Autoregression; Emerging Economies; Growth Spillovers (search for similar items in EconPapers)
JEL-codes: F43 F44 F47 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (23)

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Working Paper: Macroeconomic transmission of eurozone shocks to emerging economies (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepiie:2012-q3-131-3

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