Testing Shock Transmission Channels to Low-Income Developing Countries

By Nina Biljanovska, Alexis Meyer-Cirkel

May 23, 2016

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Nina Biljanovska, and Alexis Meyer-Cirkel. Testing Shock Transmission Channels to Low-Income Developing Countries, (USA: International Monetary Fund, 2016) accessed December 3, 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

The paper examines the transmission of business cycle fluctuations and credit conditions from advanced and emerging market economies to Low-Income Developing Countries (LIDCs), using a global vector autoregressive (GVAR) framework and related countryspecific error correction models. We compile a dataset on bank credit, exports, output, and real effective exchange rate for 24 LIDCs and 16 Advanced and Emerging Markets, accounting for 74 percent of World GDP, from 1990Q1 to 2013Q4. Impulse response analyses show that business cycles in oil- and commodity-exporting, as well as frontier LIDCs are more synchronized with those in emerging market economies. Furthermore, credit conditions in the US seem to have a significant impact on exports and real economic activity in LIDCs, while these variables are basically unresponsive to credit availability in emerging markets or economies in other parts of the world.

Subject: Commodities, Credit, Emerging and frontier financial markets, Exports, Financial markets, Foreign exchange, International trade, Money, Oil, Real effective exchange rates

Keywords: Commodity-exporting LIDCs, Credit, Credit condition, Emerging and frontier financial markets, Export demand equation, Export partner, Export series, Exports, Frontier LIDCs, Global, GVAR, LICS export destination share, Low-Income Countries, Oil, Output fluctuation, Real effective exchange rates, Trade export share, Transmission of Shocks, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/102
Stock No:

WPIEA2016102
ISBN:

9781484364345
ISSN:

1018-5941

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