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Spillovers of Domestic Shocks; Will They Counteract the “Great Moderation”?

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  • Ashoka Mody
  • Alina Carare

Abstract

Even prior to the extreme volatility just observed, output growth volatility-following protracted decline-was flattening or mildly rising in some countries. More widespread was an increasing tendency from the mid-1990s for shocks in one country to transmit rapidly to other countries, creating the potential for heightened global volatility. The higher sensitivity to foreign shocks, in turn, appears related to stepped-up vertical specialization associated with the integration of emerging markets in international trade. Increased international spillovers call for stronger ex post coordination mechanisms when shocks are large but the best ex ante prevention strategy probably is sensible national policies.

Suggested Citation

  • Ashoka Mody & Alina Carare, 2010. "Spillovers of Domestic Shocks; Will They Counteract the “Great Moderation”?," IMF Working Papers 10/78, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/78
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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.
    2. Menzie Chinn, 2014. "Global supply chains and macroeconomic relationships in Asia," Chapters,in: Asia and Global Production Networks, chapter 8, pages 249-286 Edward Elgar Publishing.
    3. Erden, Lutfi & Ozkan, Ibrahim, 2014. "Determinants of international transmission of business cycles to Turkish economy," Economic Modelling, Elsevier, vol. 36(C), pages 383-390.
    4. Everaert, Gerdie & Iseringhausen, Martin, 2018. "Measuring the international dimension of output volatility," Journal of International Money and Finance, Elsevier, vol. 81(C), pages 20-39.
    5. Constant A Lonkeng Ngouana, 2013. "Structural Transformation and the Volatility of Aggregate Output in OECD Countries," IMF Working Papers 13/43, International Monetary Fund.
    6. Nikolaos Antonakakis & Harald Badinger, 2012. "Output Volatility, Economic Growth, and Cross-Country Spillovers: New Evidence for the G7 Countries," FIW Working Paper series 098, FIW.
    7. P. Fulya Gebeşoğlu & Hasan Murat Ertuğrul, 2014. "GDP Volatility Spillovers from the US and EU to Turkey: A Dynamic Investigation," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 3(2), pages 51-66, May.
    8. Antonakakis, N. & Badinger, H., 2016. "Economic growth, volatility, and cross-country spillovers: New evidence for the G7 countries," Economic Modelling, Elsevier, vol. 52(PB), pages 352-365.
    9. Fabian Bornhorst & Ashoka Mody, 2012. "Tests of German Resilience," IMF Working Papers 12/239, International Monetary Fund.
    10. Bornhorst, Fabian & Mody, Ashoka, 2012. "Test of the German resilience," CFS Working Paper Series 2012/14, Center for Financial Studies (CFS).
    11. N. Antonakakis & H. Badinger, 2014. "International business cycle spillovers since the 1870s," Applied Economics, Taylor & Francis Journals, vol. 46(30), pages 3682-3694, October.

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    Keywords

    Spillovers; Output growth volatility; vertical specialization; output growth; domestic shocks; global trade;

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