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International Macroeconomic Fluctuations

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  • Kim, Soyoung
  • Lee, Jaewoo

Abstract

This paper investigates the international dimension of economic fluctuations and transmission of structural shocks by estimating a structural VAR model for the United States, the euro area, and Japan—the three largest economies—over the post-Bretton Woods period. The main findings are as follows: (1) Supply-side shocks (technology and supply-level shocks) explain most of the fluctuations in cross-country output deviations. (2) Real-demand shocks are the most important source of real-exchange-rate fluctuations. (3) Current account is usually influenced by all types of shocks, with technology shocks playing a stronger role. In particular, technology shocks play a prominent role in the existing global imbalance (the large external deficit of the United States). (4) Technology and supply-level shocks generate opposite-signed correlations between output differential and current account, whereas real and nominal-demand shocks generate opposite-signed correlations between real exchange rate and current account.

Suggested Citation

  • Kim, Soyoung & Lee, Jaewoo, 2015. "International Macroeconomic Fluctuations," Macroeconomic Dynamics, Cambridge University Press, vol. 19(7), pages 1509-1539, October.
    • Handle: RePEc:cup:macdyn:v:19:y:2015:i:07:p:1509-1539_00
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    Cited by:

    1. Baas, Timo & Belke, Ansgar, 2017. "Oil price shocks, monetary policy and current account imbalances within a currency union," CEPS Papers 13334, Centre for European Policy Studies.
    2. Soyoung Kim & Yoonbai Kim, 2016. "The RMB Debate: Empirical Analysis on the Effects of Exchange Rate Shocks in China and Japan," The World Economy, Wiley Blackwell, vol. 39(10), pages 1539-1557, October.

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