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News shocks across countries

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  • Acosta-Henao, Miguel
  • Mihai, Marius

Abstract

We study how news shocks to TFP, foreign interest rates (R*), and commodity terms of trade (CToT) affect output variance across countries. The difference in variance share of output explained by news shocks between developing and developed countries is: I) Negligible for news shocks to TFP. II) Positive for news shocks to R* (7 pp) and CToT (9.6 pp). Less financially developed countries are more influenced by news shocks to R*, and countries with less developed derivatives markets are more impacted by news shocks to CToT. A two-sector small open economy model with non-financially included households and hedging in commodity prices explains our findings.

Suggested Citation

  • Acosta-Henao, Miguel & Mihai, Marius, 2026. "News shocks across countries," Journal of International Money and Finance, Elsevier, vol. 166(C).
    • Handle: RePEc:eee:jimfin:v:166:y:2026:i:c:s0261560626000914
    DOI: 10.1016/j.jimonfin.2026.103606
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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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