INTERNATIONAL MACROECONOMIC FLUCTUATIONS

Soyoung Kim and Jaewoo Lee

Macroeconomic Dynamics, 2015, vol. 19, issue 7, 1509-1539

Abstract: This paper investigates the international dimension of economic fluctuations and transmission of structural shocks by estimating a structural VAR model for the United States, the euro area, and Japan—the three largest economies—over the post-Bretton Woods period. The main findings are as follows: (1) Supply-side shocks (technology and supply-level shocks) explain most of the fluctuations in cross-country output deviations. (2) Real-demand shocks are the most important source of real-exchange-rate fluctuations. (3) Current account is usually influenced by all types of shocks, with technology shocks playing a stronger role. In particular, technology shocks play a prominent role in the existing global imbalance (the large external deficit of the United States). (4) Technology and supply-level shocks generate opposite-signed correlations between output differential and current account, whereas real and nominal-demand shocks generate opposite-signed correlations between real exchange rate and current account.

Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:19:y:2015:i:07:p:1509-1539_00

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