The World Is Not Enough! Small Open Economies and Regional Dependence

Arbeitspapier

This paper bridges the new open economy factor augmented VAR (FAVAR) studies with the recent findings in the business cycle synchronization literature emphasizing the importance of regional factors. That is, we estimate and identify a three block FAVAR model with separate world, regional and domestic blocks and study the transmission of both global and regional shocks to four small open economies (Canada, New Zealand, Norway and UK). The results show that foreign shocks explain a major share of the variance in all countries, most so shocks that are common to the world. However, regional shocks also play an important role, explaining more than 20 percent of the variance in the variables. Hence in small open economies, the world is not enough. The regional factors impact the four countries differently, though, some through trade and some through consumer sentiment. Our findings of a strong transmission of both global and regional shocks to open economies are in sharp contrast to the evidence from recently developed open economy DSGE models.

Angaben zum Objekt

• ISBN: 978-82-7553-628-8
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 2011/16

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Business Fluctuations; Cycles ; Open Economy Macroeconomics
• Thema: FAVAR ; factor augmented VAR ; international transmission ; world and region ; small open economy ; business cycles

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Aastveit, Knut Are ; Bjørnland, Hilde C. ; Thorsrud, Leif Anders
• Ereignis: Veröffentlichung
• (wer): Norges Bank
• (wo): Oslo
• (wann): 2011

Weitere Informationen

• Handle: http://hdl.handle.net/10419/209992
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ