Measuring and Evaluating the Dynamics of Trade Shock Propagation in the Oceania

Oceania’s extra-trade performance is quite considerable relative to its intra-trade. This indicates that the Oceania may be susceptible to trade shocks originating from its main trading partners in the global economy. Given that shocks often occur, the presence of such enormous and dynamic external sector makes economic growth in the Oceania vulnerable to shocks. This study, therefore, investigates the dynamics of trade shock transmission between the Oceania and the rest of the global economy. The study constructed generalized trade linkage measures at various degrees of aggregation. The results indicate that the trade linkage between the Oceania and the rest of the global economy is quite substantial, with the total trade linkage index having a mean value of 83%. The results also show that USA, China, Canada, France, Germany, and Japan exert dominant influence on Oceania’s trade and therefore have the potential to spread trade shocks to it. Overall, the findings show that economies in the Oceania are predominantly net receivers of trade shocks originating from the aforementioned dominant sources, suggesting that policymakers and leaders in the Oceania should coordinate efforts towards safeguarding the region against future adverse trade shocks.