Spillovers of Domestic Shocks: Will They Counteract the "Great Moderation"?

30 Pages Posted: 26 Apr 2010

See all articles by Alina Carare

Alina Carare

International Monetary Fund (IMF)

Ashoka Mody

International Monetary Fund (IMF) - Research Department

Date Written: March 2010

Abstract

Even prior to the extreme volatility just observed, output growth volatility-following protracted decline-was flattening or mildly rising in some countries. More widespread was an increasing tendency from the mid-1990s for shocks in one country to transmit rapidly to other countries, creating the potential for heightened global volatility. The higher sensitivity to foreign shocks, in turn, appears related to stepped-up vertical specialization associated with the integration of emerging markets in international trade. Increased international spillovers call for stronger ex post coordination mechanisms when shocks are large but the best ex ante prevention strategy probably is sensible national policies.

Keywords: Business cycles, Cross country analysis, Developed countries, Economic integration, Economic policy, Emerging markets, External shocks, Globalization, Industrial production, International trade, Production growth, Spillovers

Suggested Citation

Carare, Alina and Mody, Ashoka, Spillovers of Domestic Shocks: Will They Counteract the "Great Moderation"? (March 2010). IMF Working Paper No. 10/78, Available at SSRN: https://ssrn.com/abstract=1594550

Alina Carare

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Ashoka Mody (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-9617 (Phone)
202-589-9617 (Fax)

HOME PAGE: http://www.amody.com

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