Potential Contagion Effects on OECD Countries: A FAVAR Model under Bayesian Framework

Olfa Kaabia

International Economic Journal, 2015, vol. 29, issue 1, 73-94

Abstract: This paper studies whether and how US shocks impact the OECD countries in the case of a simulated crisis. Using Bayesian estimation methods we extract constrained factors (global, country and variable type specific) from a sample of 153 economic and financial OECD variables from 1980-2008. These factors are the transmission channels through which national shocks spread to other countries, as in a pandemic. The Bayesian interpretable factors are used to estimate FAVAR models. Our main findings suggest that differences exist in the contagion effects. This implies that no generalizations can be made for OECD countries even of equal economic size and in the same geographic region. In addition, our results show that a large portion of the variance of domestic economic variables is explained by global factors; and that the interest rate shock appears to play an important role in the spillover mechanism from the United States to the rest of the world. More precisely, Australia, the United Kingdom and Scandinavian countries appear to be most sensitive to the US shocks.

Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10168737.2014.948036 (text/html)
Access to full text is restricted to subscribers.

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:taf:intecj:v:29:y:2015:i:1:p:73-94

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RIEJ20

DOI: 10.1080/10168737.2014.948036

Access Statistics for this article

International Economic Journal is currently edited by Jaymin Lee Editor

More articles in International Economic Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().