Investigating Global Imbalances: Empirical evidence from a GVAR approach

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper investigates the development of external imbalances from an international perspective by estimating a Global VAR model for the period 1981Q1-2009Q4 with a setup close to that of an international real business cycle model. The model considers 28 countries of which 10 are aggregated as the Eurozone. We compute generalized impulse response functions, as well as generalized forecast error variance decompositions, in order to measure the effects of shocks on international trade balances. The United States, Eurozone and China are considered as the sources of those shocks. We account for imbalances using real GDP, real effective exchange rates (REER) and real interest rates (RIR) as well as the oil price. Overall, we find evidence for the joint dynamics of our variables as drivers of the imbalances and relate our findings to theories of Global Imbalances. We show that real GDP is a relatively unimportant variable compared to the REER, RIR and the oil price. Moreover, we provide a counterfactual analysis of the US trade balance. Terms of use: Documents inJEL Classification: F10, F32, F41.

The role of China in the world economy: evidence from a global VAR model

“…The benchmark Shanghai Composite crashed, wiping out over 40% of its value (see Figure 6). Authorities introduced a number of measures to stop the losses, such as banning large shareholders from selling, outlawing forms of short-selling, chasing down individuals they blamed for manipulating the markets, and a circuit breaker mechanism 4 . As the result of the crash on China stock exchange, large decreases were observed in the international stock markets.…”

“…The shock is temporary and becomes statistically insignificant in three quarters. that seems to suggest that the decrease in stock prices in China does not have a 4 The breaker mechanism, however, created panic selling and had to be withdrawn. significant effect on stock markets in these countries.…”

“…Additionally we show, how the two shocks are transmitted to China's domestic economy. 4 China plays an important role both in traditional global trade and in the global supply chains, processing intermediate goods and re-exporting them to other regions. Therefore for some countries, the direct effects of slowdown in the Chinese economy might be small, whereas the indirect effects, especially through the neighbour countries, might be significant.…”

Real and Financial Asymmetries in the Euro Area

“…I apply the global vector auto-regression (GVAR) approach to a subset of nine EA countries and their nine most important international trading partners. My research closely follows Bettendorf (2012)…”

“…Holinski and Vermeulen (2009) test the link between asset prices, consumption and the trade balance and find the international wealth effect to be present in some but not all countries. Bettendorf (2012) investigates the international drivers of external imbalances and provides evidence of the relative unimportance of shocks to real GDP and of US exchange rate shocks in explaining trade balance movements of the aggregate EA. Oil price shocks are found to be important drivers of the trade balance.…”