The transmission of shocks between Europe, Japan and the United States

✍ Scribed by Shushanik Papanyan

• Publisher: John Wiley and Sons
• Year: 2010
• Tongue: English
• Weight: 264 KB
• Volume: 29
• Category: Article
• ISSN: 0277-6693
• DOI: 10.1002/for.1158

✦ Synopsis

This paper identifi es the types of shocks that affect the economies of Europe, the USA and Japan, and the transmission paths of those shocks between these countries. The identifi cation of shocks is based on the Cointegrated VAR methodology. The categorization and interpretation of shocks are based on synthesis of theoretical studies on international business cycles and international policy coordination. We show that the Cointegrated VAR model is a valid choice and that it demonstrates good fi t with the data-generating processes of the time series examined. We fi nd that country-specifi c US permanent shocks transmit to Europe and Japan and, when positive, have a locomotive effect. The USA is not affected by the country-specifi c permanent shocks of Europe or Japan. The permanent shocks originating in Europe or Japan do not have a signifi cant effect on the opposite country's growth rates. The model identifi es one common symmetric transitory shock affecting all three countries.