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Trade Linkages and Output‐Multiplier Effects: a Structural VAR Approach with a Focus on Asia *
Author(s) -
Abeysinghe Tilak,
Forbes Kristin
Publication year - 2005
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2005.00508.x
Subject(s) - economics , shock (circulatory) , multiplier (economics) , impulse response , vector autoregression , econometrics , impulse (physics) , macroeconomics , international economics , monetary economics , mathematics , physics , mathematical analysis , medicine , quantum mechanics
This paper develops a structural VAR model to measure how a shock to one country affects other countries’ GDP. It uses trade linkages to estimate the multiplier effects as a shock is transmitted through output fluctuations and introduces a new specification strategy that reduces the number of unknowns and allows cross‐country relationships to vary over time. This model is used to examine the impact of shocks to 11 Asian countries, the US, and the rest of the OECD. Impulse‐response matrices suggest that these multiplier effects are large and can transmit shocks in very different patterns than predicted from a bilateral‐trade matrix.