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Spillovers of Domestic Shocks

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Author Info

  • Ashoka Mody
  • Alina Carare

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.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/78.

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Length: 29
Date of creation: 01 Mar 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/78

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Related research

Keywords: Spillovers; Developed countries; Emerging markets; External shocks; Industrial production; Production growth; vertical specialization; output growth; domestic shocks; global trade; output volatility; idiosyncratic shocks; trade intensity; world trade; global production; global supply; international trade; supply chain; aggregate volatility; trade share; trade agreement; lead; trade integration; trade links; free trade agreement; global shocks; oil shock; transport equipment; national policies; global integration; transition countries; trade relationships; bilateral trade; per capita income; trade openness; political economy; free trade; vertical integration; trade costs;

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References

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  1. Emanuele Breda & Rita Cappariello & Roberta Zizza, 2008. "Vertical specialisation in Europe: Evidence from the import content of exports," Temi di discussione (Economic working papers) 682, Bank of Italy, Economic Research and International Relations Area.
  2. Barry Eichengreen & Ashoka Mody & Milan Nedeljkovic & Lucio Sarno, 2009. "How the Subprime Crisis Went Global: Evidence from Bank Credit Default Swap Spreads," NBER Working Papers 14904, National Bureau of Economic Research, Inc.
  3. Ariel Burstein & Christopher Johann Kurz & Linda Tesar, 2004. "Trade, Production Sharing and the International Transmission of Business Cycles," Working Papers 522, Research Seminar in International Economics, University of Michigan.
  4. Giannone, Domenico & Lenza, Michele & Reichlin, Lucrezia, 2007. "Explaining The Great Moderation: It Is Not The Shocks," CEPR Discussion Papers 6600, C.E.P.R. Discussion Papers.
  5. Mody, Ashoka & Taylor, Mark P., 2007. "Regional vulnerability: The case of East Asia," Journal of International Money and Finance, Elsevier, vol. 26(8), pages 1292-1310, December.
  6. James H. Stock & Mark W. Watson, 2003. "Understanding Changes in International Business Cycle Dynamics," NBER Working Papers 9859, National Bureau of Economic Research, Inc.
  7. Forbes, Kristin & Chinn, Menzie, 2003. "A Decomposition of Global Linkages in Financial Markets over Time," Santa Cruz Center for International Economics, Working Paper Series qt6z74b3x7, Center for International Economics, UC Santa Cruz.
  8. David Hummels & Jun Ishii & Kei-Mu Yi, 1999. "The nature and growth of vertical specialization in world trade," Staff Reports 72, Federal Reserve Bank of New York.
  9. Nir Jaimovich & Henry E. Siu, 2007. "The young, the old, and the restless: demographics and business cycle volatility," Staff Report 387, Federal Reserve Bank of Minneapolis.
  10. Logan Lewis & Linda Tesar & Andrei Levchenko, 2010. "The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun," 2010 Meeting Papers 109, Society for Economic Dynamics.
  11. Galí, Jordi & Gambetti, Luca, 2008. "On the Sources of the Great Moderation," CEPR Discussion Papers 6632, C.E.P.R. Discussion Papers.
  12. Kei-Mu Yi, 2000. "Can vertical specialization explain the growth of world trade?," Staff Reports 96, Federal Reserve Bank of New York.
  13. Sinn, Hans-Werner, 2006. "The pathological export boom and the bazaar effect: How to solve the German puzzle," Munich Reprints in Economics 19602, University of Munich, Department of Economics.
  14. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(1), pages 135-174.
  15. M. Ayhan Kose & Christopher Otrok & Charles H. Whiteman, 2005. "Understanding the Evolution of World Business Cycles," IMF Working Papers 05/211, International Monetary Fund.
  16. Stephen G. Cecchetti & Alfonso Flores-Lagunes & Stefan Krause, 2006. "Assessing the Sources of Changes in the Volatility of Real Growth," NBER Working Papers 11946, National Bureau of Economic Research, Inc.
  17. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2008. "How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive," NBER Working Papers 14109, National Bureau of Economic Research, Inc.
  18. Tatiana Cesaroni & Louis Maccini & Marco Malgarini, 2009. "Business cycle volatility and inventories behavior:new evidence for the Euro Area," ISAE Working Papers 108, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
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Citations

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Cited by:
  1. Fabian Bornhorst & Ashoka Mody, 2012. "Tests of German Resilience," IMF Working Papers 12/239, International Monetary Fund.
  2. Steffen Henzel & Elisabeth Wieland, 2013. "Synchronization and Changes in International Inflation Uncertainty," CESifo Working Paper Series 4194, CESifo Group Munich.
  3. Erden, Lutfi & Ozkan, Ibrahim, 2014. "Determinants of international transmission of business cycles to Turkish economy," Economic Modelling, Elsevier, vol. 36(C), pages 383-390.
  4. Nikolaos Antonakakis & Harald Badinger, 2012. "Output Volatility, Economic Growth, and Cross-Country Spillovers: New Evidence for the G7 Countries," Department of Economics Working Papers wuwp141, Vienna University of Economics, Department of Economics.
  5. Bornhorst, Fabian & Mody, Ashoka, 2012. "Test of the German resilience," CFS Working Paper Series 2012/14, Center for Financial Studies (CFS).
  6. Constant Lonkeng Ngouana, 2013. "Structural Transformation and the Volatility of Aggregate Output in OECD Countries," IMF Working Papers 13/43, International Monetary Fund.

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