Foreign Entanglements: Estimating the Source and Size of Spillovers Across Industrial Countries

Tamim Bayoumi and Andrew Swiston

No 2007/182, IMF Working Papers from International Monetary Fund

Abstract: VARs of real growth since 1970 are used to estimate spillovers between the U.S., euro area, Japan, and an aggregate of small industrial countries, which proxies for global shocks. U.S. and global shocks generate significant spillovers, while those from the euro area and Japan are small. This paper also calculates the standard errors of impulse-response functions including uncertainty over the proper Cholesky ordering. Extensions adding real net exports, commodity prices, and financial variables indicate that financial effects dominate spillovers. The results by subperiod underline the importance of the great moderation in U.S. output fluctuations and associated financial stability in lowering output volatility elsewhere.

Keywords: WP; Euro area; area shock; U.S.-rest of the world covariance (search for similar items in EconPapers)
Pages: 52
Date: 2007-07-01
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Citations: View citations in EconPapers (36)

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Journal Article: Foreign Entanglements: Estimating the Source and Size of Spillovers Across Industrial Countries (2009)
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