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International Spillovers of Macroeconomic Shocks
A Quantitative Exploration

16 Pages Posted: 15 Feb 2006  

Douglas Laxton

International Monetary Fund (IMF) - Research Department

Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management; Cornell University - Department of Economics; Brookings Institution; NBER; IZA Institute of Labor Economics

Date Written: June 2000

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: Macroeconomic shocks international spillovers nominal interest rate floor macroeconometric simulations

JEL Classification: E32 E37 F42

Suggested Citation

Laxton, Douglas and Prasad, Eswar S., International Spillovers of Macroeconomic Shocks A Quantitative Exploration (June 2000). IMF Working Paper, Vol. , pp. 1-16, 2000. Available at SSRN: https://ssrn.com/abstract=879666

Douglas Laxton (Contact Author)

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

700 19th Street NW
Washington, DC 20431
United States

Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management ( email )

440 Warren Hall
Ithaca, NY 14853
United States

HOME PAGE: http://prasad.aem.cornell.edu

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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