Trade Linkages and Output-Multiplier Effects: A Structural VAR Approach with a Focus on Asia

20 Pages Posted: 29 Apr 2005

See all articles by Tilak Abeysinghe

Tilak Abeysinghe

National University of Singapore (NUS) - Department of Economics

Kristin J. Forbes

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

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Abstract

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.

Suggested Citation

Abeysinghe, Tilak and Forbes, Kristin J., Trade Linkages and Output-Multiplier Effects: A Structural VAR Approach with a Focus on Asia. Available at SSRN: https://ssrn.com/abstract=712205

Tilak Abeysinghe (Contact Author)

National University of Singapore (NUS) - Department of Economics ( email )

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Kristin J. Forbes

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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