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Estimating International Transmission of Shocks Using GDP Forecasts: India and Its Trading Partners

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  • Kajal Lahiri
  • Gultekin Isiklar

Abstract

Using a Factor Structural Vector Autoregressive (FSVAR) model and monthly GDP growth forecasts during 1995-2003, we find that Indian economy responds largely to domestic and Asian common shocks, and much less to shocks the from the West. However, when we exclude the Asian crisis period from our sample, the Western factor comes out as strong as the Asian factor contributing 16% each to the Indian real GDP growth, suggesting that the dynamics of transmission mechanism is time-varying. Our methodology on the use of forecast data can help policy makers of especially developing countries with frequent economic crises and data limitations to adjust their policy targets in real time.

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Bibliographic Info

Paper provided by University at Albany, SUNY, Department of Economics in its series Discussion Papers with number 10-06.

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Date of creation: 2010
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Handle: RePEc:nya:albaec:10-06

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Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
Phone: (518) 442-4735
Fax: (518) 442-4736

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Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
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Cited by:
  1. Steffen Henzel & Elisabeth Wieland, 2013. "Synchronization and Changes in International Inflation Uncertainty," CESifo Working Paper Series 4194, CESifo Group Munich.

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