The International Transmission of U.S. Structural Shocks – Evidence from Global Vector Autoregressions

Arbeitspapier

In this paper we analyze the impact of three U.S. structural shocks on, and its transmission 0to, the world economy. For that purpose we use a Bayesian version of the global vector autoregressive (GVAR) model coupled with a prior specification that explicitly treats uncertainty regarding variable choice in the estimation stage of the model. Based on sign restrictions, we identify positive U.S. aggregate demand and supply shocks and a contractionary U.S. monetary policy shock. Our results are three-fold: First, we find significant spillovers of U.S. based shocks on the global economy. Responses of international output to a U.S. monetary policy shock are most pronounced, while those related to aggregate demand and supply shocks are more modest. Second, the dynamics of the receiving countries' responses depend on the structural interpretation of the respective shock. More specifically, whereas responses to the U.S. demand shock are rather short-lived, the remaining shocks produce spillovers that impact permanently on domestic output. Third, U.S. shocks tend to spread globally through interest rates which resembles the pivotal role of the economy in shaping international financial markets. Co-movements in output and indirect effects via the oil price are additional important channels through which U.S. shocks feed into the domestic economy.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 195

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models; Multiple Variables: General ; Monetary Policy ; Open Economy Macroeconomics ; Business Fluctuations; Cycles
• Subject: Transmission of external shocks ; Global vector autoregressions ; stochastic search variable selection ; sign restrictions ; model uncertainty

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Feldkircher, Martin ; Huber, Florian
• Event: Veröffentlichung
• (who): Oesterreichische Nationalbank (OeNB)
• (where): Vienna
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/264787
• Last update: 10.03.2025, 11:44 AM CET