Do world shocks drive domestic business cycles? Some evidence from structural estimation

Arbeitspapier

Existing results on the contribution of terms of trade and world interest rate shocks to output fluctuations in small open economies range from less than 10% to almost 90%. We argue that an identification problems lies at the heart of these vastly di¤erent results. In this paper, we overcome this by estimating a DSGE model using a structural Bayesian estimation approach. We apply our methodology to five developed and developing economies.. Our approach allows us to e?ciently exploit cross-equation restrictions implied by the structural model. We find that world interest rate shocks are the main driving forces of business cycles in small open economies while terms of trade shocks are not.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 522

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Open Economy Macroeconomics
• Subject: World Shocks ; Business Cycles ; Small Open Economy Model ; Structural Estimation ; Bayesian Analysis ; Konjunkturzusammenhang ; Schock ; Kleines-offenes-Land ; Dynamisches Gleichgewicht ; Terms of Trade ; Schätzung ; Australien ; Kanada ; Neuseeland ; Mexiko ; Chile

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lubik, Thomas ; Teo, Wing Leong
• Event: Veröffentlichung
• (who): The Johns Hopkins University, Department of Economics
• (where): Baltimore, MD
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/71987
• Last update: 10.03.2025, 11:45 AM CET