International Spillovers of Macroeconomic Shocks: A Quantitative Exploration

Douglas Laxton and Eswar Prasad

No 2000/101, IMF Working Papers from International Monetary Fund

Abstract: This paper provides a quantitative exploration of international spillovers of macroeconomic shocks among the major industrial economies. The particular topical example analyzed here concerns the possible effects on the industrial economies of adverse shocks to the current U.S. economic expansion. The potential spillover effects of U.S. shocks to other industrial economies are found to be quite large. Extant economic conditions, particularly the low levels of nominal interest rates and the consequent possibility of liquidity traps in countries such as Japan, could significantly magnify these spillover effects.

Keywords: WP; nominal interest rate; monetary policy; economy; Macroeconomic shocks; international spillovers; nominal interest rate floor; macroeconometric simulations; inflation-unemployment trade-off; United States economy; inflation environment; inflation rate; GDP ratio; closed economy; price level; choice of inflation target; int. rate; Inflation; Nominal effective exchange rate; Interest rate floor; Current account balance; Unemployment rate; Global (search for similar items in EconPapers)
Pages: 15
Date: 2000-06-01
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Citations: View citations in EconPapers (6)

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