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

33 Pages Posted: 27 Apr 2008

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: April 25, 2008

Abstract

VARs of real growth since 1970 are used to estimate spillovers between the U.S., euro area, Japan, and an aggregate of smaller 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 exports, commodity prices, and financial variables indicate that financial effects are the largest source of 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: spillovers, international business cycles, vector autoregressions, United States, euro area

JEL Classification: C32, E32, F20, F43

Suggested Citation

Bayoumi, Tamim and Swiston, Andrew J., Foreign Entanglements: Estimating the Source and Size of Spillovers Across Industrial Countries (April 25, 2008). Available at SSRN: https://ssrn.com/abstract=1125342 or http://dx.doi.org/10.2139/ssrn.1125342

Tamim Bayoumi (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6333 (Phone)
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Andrew J. Swiston

International Monetary Fund (IMF) ( email )

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

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