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Systemic Risk, Aggregate Demand, and Commodity Prices

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Listed:
  • Javier Gómez-Pineda
  • Mr. Dominique M. Guillaume
  • Kadir Tanyeri

Abstract

The paper presents a global model with systemic and country risks, as well as commodity prices.We show that systemic risk shocks have an important impact on world economic activity, with the busts in world output gap corresponding to unobserved systemic risk associated with major financial events. In addition, systemic risk shocks are shown to be important drivers of output gaps while country risk premium shocks can have important effects on the trade balance. Commodity prices, in particular the price of oil, are shown to be demand driven. The model performs well at one- and four-quarter horizons compared to a survey of analysts' forecasts. In addition, systemic risk shocks explain a large share of the forecast variance for the world output gap, country output gaps, the price of oil, and country risk premiums. The importance of systemic risk shocks lends support for financial surveillance with a systemic focus.

Suggested Citation

  • Javier Gómez-Pineda & Mr. Dominique M. Guillaume & Kadir Tanyeri, 2015. "Systemic Risk, Aggregate Demand, and Commodity Prices," IMF Working Papers 2015/165, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2015/165
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    Cited by:

    1. Javier G. Gómez-Pineda, 2016. "Commodity Price Fluctuations, Core Inflation and Policy Interest Rates," Borradores de Economia 967, Banco de la Republica de Colombia.
    2. Javier G. Gómez-Pineda, 2017. "Volatility Spillovers and Systemic Risk Across Economies: Evidence from a Global Semi-Structural Model," Borradores de Economia 1011, Banco de la Republica de Colombia.
    3. M. Tiunova G. & М. Тиунова Г., 2018. "Влияние Внешних Шоков На Российскую Экономику // The Impact Of External Shocks On The Russian Economy," Финансы: теория и практика/Finance: Theory and Practice // Finance: Theory and Practice, ФГОБУВО Финансовый университет при Правительстве Российской Федерации // Financial University under The Government of Russian Federation, vol. 22(4), pages 146-170.

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    More about this item

    Keywords

    WP; Systemic risk; Financial linkages; Capital flows; Global imbalances Commodity prices; country risk risk premium; world output gap; trade balance gap; premium shock; country output gaps; Return on investment; Output gap; Trade balance; Food prices; Global; East Asia; Europe;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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