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INTERNATIONAL TRANSMISSION MECHANISM AND WORLD BUSINESS CYCLE
Author(s) -
Shen Yifan,
Abeysinghe Tilak
Publication year - 2021
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12916
Subject(s) - business cycle , interdependence , structural vector autoregression , economics , dynamic factor , mechanism (biology) , vector autoregression , transmission (telecommunications) , construct (python library) , international trade , macroeconomics , computer science , econometrics , monetary policy , political science , telecommunications , philosophy , epistemology , law , programming language
Understanding international transmission mechanism that generates the world business cycle is of immense interest. In this paper, we compile a rich global dataset and utilize a trade‐linked structural vector autoregression (SVAR) model with a relatively realistic identification scheme to construct a worldwide dynamic interdependency system. Empirical results indicate that the trade‐linked SVAR system can largely capture the common dynamic properties of national business cycle fluctuations, providing a meaningful transmission foundation to the world business cycle derived from dynamic factor models. Based on the worldwide trade‐linked SVAR system, we further shed light on three crucial topics in international economics. The findings and methods in this paper help to evaluate the macroeconomic consequences of recent trade dispute between world major economies. ( JEL F41, F44, O19)