Working Paper

Common and idiosyncratic disturbances in developed small open economies


Abstract: Using an estimated dynamic stochastic general equilibrium model, I show that shocks to a common international stochastic trend explain on average about 10% of the variability of output in several small developed economies. These shocks explain roughly twice as much of the volatility of consumption growth as the volatility of output growth. Country-speci c disturbances account for the bulk of the volatility in the data. Substantial heterogeneity in the estimated parameters and stochastic processes translates into a rich array of impulse responses across countries.

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Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2012

Number: 12-3