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The international transmission of US shocks—Evidence from Bayesian global vector autoregressions

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  • Feldkircher, Martin
  • Huber, Florian

Abstract

We analyze international spillovers of expansionary US aggregate demand and supply shocks, and of a contractionary US monetary policy shock. For that purpose we use a Bayesian version of the global vector autoregressive model coupled with a prior specification that explicitly accounts for uncertainty regarding variable choice. Our results are three-fold: first, we find significant spillovers of all three shocks, with the monetary policy shock impacting most strongly on international output. Second, the dynamics of the receiving countries׳ responses depend on the structural interpretation of the respective shock. Third, US shocks tend to spread globally through the financial channel (i.e., interest rates) and the trade channel (i.e., the real effective exchange rate).

Suggested Citation

  • Feldkircher, Martin & Huber, Florian, 2016. "The international transmission of US shocks—Evidence from Bayesian global vector autoregressions," European Economic Review, Elsevier, vol. 81(C), pages 167-188.
    • Handle: RePEc:eee:eecrev:v:81:y:2016:i:c:p:167-188
    DOI: 10.1016/j.euroecorev.2015.01.009
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    More about this item

    Keywords

    Transmission of external shocks; Trade and financial integration; Stochastic search variable selection; Sign restrictions; Model uncertainty;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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