Spillovers of Domestic Shocks: Will They Counteract the “Great Moderation”?

March 1, 2010

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Format: Chicago

Ashoka Mody, and Alina Carare. Spillovers of Domestic Shocks: Will They Counteract the “Great Moderation”?, (USA: International Monetary Fund, 2010) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Even prior to the extreme volatility just observed, output growth volatility-following protracted decline-was flattening or mildly rising in some countries. More widespread was an increasing tendency from the mid-1990s for shocks in one country to transmit rapidly to other countries, creating the potential for heightened global volatility. The higher sensitivity to foreign shocks, in turn, appears related to stepped-up vertical specialization associated with the integration of emerging markets in international trade. Increased international spillovers call for stronger ex post coordination mechanisms when shocks are large but the best ex ante prevention strategy probably is sensible national policies.

Subject: Financial crises, Production growth, Spillovers, Stocks, Structural vector autoregression

Keywords: GDP ratio, Global economy, Trade share, WP

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/078
Stock No:

WPIEA2010078
ISBN:

9781451982213
ISSN:

1018-5941

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