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

54 Pages Posted: 23 Aug 2007

See all articles by Tamim Bayoumi

Tamim Bayoumi

International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

Andrew J. Swiston

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2007

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: Working Paper, Japan, United States, Exports, Commodity prices

Suggested Citation

Bayoumi, Tamim and Swiston, Andrew J., Foreign Entanglements: Estimating the Source and Size of Spillovers Across Industrial Countries (July 2007). IMF Working Papers, Vol. , pp. 1-52, 2007. Available at SSRN: https://ssrn.com/abstract=1007931

Tamim Bayoumi

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6333 (Phone)
202-623-4795 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Andrew J. Swiston (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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