World Shocks, World Prices, and Business Cycles: An Empirical Investigation

Andrés Fernández Martin, Stephanie Schmitt-Grohe and Martín Uribe ()

No 8315, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: SVAR models that include a single world price (such as the terms-of-trade) predict that world shocks explain a small fraction of movements in domestic output (typically less than 10 percent). This paper presents an empirical framework in which multiple commodity prices transmit world disturbances. Estimates on a panel of 138 countries over the period 1960-2015 indicate that world shocks explain on average 33 percent of output fluctuations in individual economies. This figure doubles when the model is estimated on post-2000 data. The findings reported here suggest that one-world-price specifications significantly underestimate the importance of world shocks for domestic business cycles.

Keywords: World; prices (search for similar items in EconPapers)
Date: 2017-06
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Citations: View citations in EconPapers (59)

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Related works:
Journal Article: World shocks, world prices, and business cycles: An empirical investigation (2017)
Chapter: World Shocks, World Prices, and Business Cycles: An Empirical Investigation (2016)
Working Paper: World Shocks, World Prices, and Business Cycles: An Empirical Investigation (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:8315

DOI: 10.18235/0000721

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