The Caribbean and its Linkages with the World: A GVAR Model Approach

November 27, 2019

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Mauricio Vargas, and Daniela Hess. The Caribbean and its Linkages with the World: A GVAR Model Approach, (USA: International Monetary Fund, 2019) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Using data from 1980-2017, this paper estimates a Global VAR (GVAR) model taylored for the Caribbean region which includes its major trading partners, representing altogether around 60 percent of the global economy. We provide stilyzed facts of the main interrelations between the Caribbean region and the rest of the world, and then we quantify the impact of external shocks on Caribbean countries through the application of two case studies: i) a change in the international price of oil, and ii) an increase in the U.S. GDP. We confirmed that Caribbean countries are highly exposed to external factors, and that a fall in oil prices and an increase in the U.S. GDP have a positive and large impact on most of them after controlling for financial variables, exchange rate fluctuations and overall price changes. The results from the model help to disentangle effects from various channels that interact at the same time, such as flows of tourists, trade of goods, and changes in economic conditions in the largest economies of the globe.

Subject: Commodities, Econometric analysis, Economic sectors, Imports, International trade, Oil, Oil prices, Prices, Tourism, Vector autoregression

Keywords: Caribbean, ECCU country, ECCU economy, Exchange rate, Global, GVAR model, Imports, Oil, Oil price drop, Oil prices, Shock equivalent, Tourism, Vector autoregression, WP

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/256
Stock No:

WPIEA2019256
ISBN:

9781498326766
ISSN:

1018-5941

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