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Low-Income Countries' BRIC Linkage

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  • Issouf Samaké
  • Yongzheng Yang
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    Abstract

    Trade and financial ties between low-income countries (LICs) and Brazil, Russia, India, and China (BRICs) have expanded rapidly in recent years. This gives rise to the potential for growth to spill over from the latter to the former. We employ a global vector autoregression (GVAR) model to investigate the extent of business cycle transmission from BRICs to LICs through both direct (FDI, trade, productivity, exchange rates) and indirect (global commodity prices, demand, and interest rates) channels. The estimation results show that there are significant direct spillovers while indirect spillovers also matters in many cases. Based on these results, we show that growing LIC-BRIC ties have significantly helped alleviate the adverse impact of the recent global financial crisis on LIC economies.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/267.

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    Length: 35
    Date of creation: 01 Nov 2011
    Date of revision:
    Handle: RePEc:imf:imfwpa:11/267

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    Related research

    Keywords: Spillovers; Economic growth; Economic models; Low-income developing countries; exporters; commodity prices; oil exporters; commodity exporters; oil prices; trade shocks; exporting countries; world economy; world demand; oil exporting countries; oil exporter; bilateral trade; idiosyncratic shocks; international trade; output growth; exchange rate movements; growing trade; trade patterns; terms of trade; exporter; real effective exchange rate; market exchange rates; trade links; trade partner; world exports; net exporters; economic indicators; oil exporting; exports of goods; oil-exporting countries; export goods; trading partners; trading partner; changes in trade; trade relations; idiosyncratic factors; external shocks; non-oil commodity; factor endowments; global market; country oil exporters; per capita income; import costs; capital flows; trade volume; aggregate demand; non-oil commodity exporters; trade pattern; commodity-exporting countries;

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    References

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    1. Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2000. "The Generalized Dynamic-Factor Model: Identification And Estimation," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 540-554, November.
    2. Boyd, Derick & Caporale, Gugielmo Maria & Smith, Ron, 2001. "Real Exchange Rate Effects on the Balance of Trade: Cointegration and the Marshall-Lerner Condition," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 187-200, July.
    3. M. Ayhan Kose & Kenneth Rogoff & Eswar Prasad & Shang-Jin Wei, 2003. "Effects of Financial Globalization on Developing Countries," IMF Occasional Papers 220, International Monetary Fund.
    4. Silvia Sgherri & Alessandro Galesi, 2009. "Regional Financial Spillovers Across Europe," IMF Working Papers 09/23, International Monetary Fund.
    5. Blanchard, Olivier & Giavazzi, Francesco & Sa, Filipa, 2005. "The US Current Account and the Dollar," CEPR Discussion Papers 4888, C.E.P.R. Discussion Papers.
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    Cited by:
    1. Al-Najjar, Basil, 2013. "The financial determinants of corporate cash holdings: Evidence from some emerging markets," International Business Review, Elsevier, vol. 22(1), pages 77-88.

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