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Global and Domestic Modeling of Macroeconomic Shocks: A GVAR Analysis of Ireland

Michael O'Grady, Jonathan Rice and Graeme Walsh
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Michael O'Grady: Central Bank of Ireland
Graeme Walsh: Central Bank of Ireland

No 09/RT/17, Research Technical Papers from Central Bank of Ireland

Abstract: This paper studies the effects of external macroeconomic shocks on Ireland. Using a weighting scheme based on international trade linkages, we apply a global vector autoregressive model (GVAR) to investigate the degree of shock transmission between Ireland and a number of advanced countries / regions. Constructing a global model of 25 countries over the 1980q1-2016q1 sample period, we examine responses to five distinct shocks: a US interest rate hike; a decline in UK GDP; a depreciation of UK exchange rates; a reduction in Chinese output; and a global economic slowdown. Results suggest that Ireland is relatively more exposed to shocks to the UK economy, than either the euro area or the US, while it is relatively more insulated to movements in oil prices.

Keywords: Global VAR; macro-financial linkages; global spillovers (search for similar items in EconPapers)
JEL-codes: E44 F41 C33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-opm
Date: 2017-11
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