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The Global Impact of the Systemic Economies and MENA Business Cycles

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Author Info

  • Paul Cashin
  • Kamiar Mohaddes
  • Mehdi Raissi

Abstract

This paper analyzes spillovers from macroeconomic shocks in systemic economies (China, the Euro Area, and the United States) to the Middle East and North Africa (MENA) region as well as outward spillovers from a GDP shock in the Gulf Cooperation Council (GCC) countries and MENA oil exporters to the rest of the world. This analysis is based on a Global Vector Autoregression (GVAR) model, estimated for 38 countries/regions over the period 1979Q2 to 2011Q2. Spillovers are transmitted across economies via trade, financial, and commodity price linkages. The results show that the MENA countries are more sensitive to developments in China than to shocks in the Euro Area or the United States, in line with the direction of evolving trade patterns and the emergence of China as a key driver of the global economy. Outward spillovers from the GCC region and MENA oil exporters are likely to be stronger in their immediate geographical proximity, but also have global implications.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/255.

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Length: 40
Date of creation: 25 Oct 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/255

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Keywords: Spillovers; Middle East; North Africa; China; Europe; United States; External shocks; Business cycles; Economic models; Global VAR (GVAR); interconnectedness; global macroeconomic modeling; impulse responses; macroeconomic shocks; international business cycle.; oil exporters; oil prices; oil exports; reer; real effective exchange rate; world economy; commodity exporters; trading partners; commodity exports; export share; trade flows; merchandise exports; bilateral trade; commodity prices; petroleum exporting countries; transmission of shocks; oil importers; trade patterns; open capital accounts; aggregate demand; crude oil exports; trade share; international trade; export revenues; changes in trade; oil export revenues; market for exports; trade performance; fuel exports; output elasticity; economic integration; trade relationships; global export; increasing trade; monetary union; average trade; oil revenues; regional trade; global growth prospects; open economies;

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References

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  1. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
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  11. Kamiar Mohaddes & Oral H. Williams, 2013. "Inflation Differentials In The Gcc: Does The Oil Cycle Matter?," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., vol. 5(02), pages 1350012-1-1.
  12. International Monetary Fund, 2012. "Commodity Price Volatility and the Sources of Growth," IMF Working Papers 12/12, International Monetary Fund.
  13. Esfahani, Hadi Salehi & Mohaddes, Kamiar & Pesaran, M. Hashem, 2009. "Oil Exports and the Iranian Economy," IZA Discussion Papers 4537, Institute for the Study of Labor (IZA).
  14. Harbo, Ingrid, et al, 1998. "Asymptotic Inference on Cointegrating Rank in Partial Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 388-99, October.
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  18. Cashin, P. & Mohaddes, K. & Raissi, M. & Raissi, M., 2012. "The Differential Effects of Oil Demand and Supply Shocks on the Global Economy," Cambridge Working Papers in Economics 1249, Faculty of Economics, University of Cambridge.
  19. Oral Williams & Kamiar Mohaddes, 2011. "Inflation Differentials in the GCC," IMF Working Papers 11/294, International Monetary Fund.
  20. Mehdi Raissi & Kamiar Mohaddes, 2011. "Oil Prices, External Income, and Growth," IMF Working Papers 11/291, International Monetary Fund.
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Cited by:
  1. Daniel Zerfu Gurara & Mthuli Ncube, 2013. "Working Paper 183 - Global Economic Spillovers to Africa- A GVAR Approach," Working Paper Series 981, African Development Bank.
  2. Paul Cashin & Kamiar Mohaddes & Mehdi Raissi & Maziar Raissi, 2012. "The Differential Effects of Oil Demand and Supply Shocks on the Global Economy," IMF Working Papers 12/253, International Monetary Fund.

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