Identifying Global and National Output and Fiscal Policy Shocks Using a GVAR
The paper contributes to the growing Global VAR (GVAR) literature by showing how global and national shocks can be identified within a GVAR framework. The usefulness of the proposed approach is illustrated in an application to the analysis of the interactions between public debt and real output growth in a multi-country setting, and the results are compared to those obtained from standard single-country VAR analysis. We find that on average (across countries) global shocks explain about one-third of the long-horizon forecast error variance of output growth, and about one-fifth of the long-run ...
The Growth Effects of El Niño and La Niña: Local Weather Conditions Matter
This paper contributes to the climate-economy literature by analyzing the role of weather patterns in influencing the transmission of global climate cycles to economic growth. More specifically, we focus on El Niño Southern Oscillation (ENSO) events and their interactions with local weather conditions, taking into account the heterogeneous and cumulative effects of weather patterns on economic growth and the asymmetry and nonlinearity in the global influence of ENSO on economic activity. Using data on 75 countries over the period 1975-2014, we provide evidence for the negative growth effects ...
Oil prices and the global economy: is it different this time around?
The recent plunge in oil prices has brought into question the generally accepted view that lower oil prices are good for the US and the global economy. In this paper, using a quarterly multi-country econometric model, we first show that a fall in oil prices tends relatively quickly to lower interest rates and inflation in most countries, and increase global real equity prices. The effects on real output are positive, although they take longer to materialize (around 4 quarters after the shock). We then re-examine the effects of low oil prices on the US economy over different sub-periods using ...
Rising Public Debt to GDP Can Harm Economic Growth
The debt?growth relationship is complex, varying across countries and affected by global factors. While there is no simple universal threshold above which debt to GDP significantly depresses growth, high and rising public debt burdens slow growth in the long term, data from the past four decades indicate.
Country-specific oil supply shocks and the global economy: a counterfactual analysis
This paper investigates the global macroeconomic consequences of country-specific oilsupply shocks. Our contribution is both theoretical and empirical. On the theoretical side, we develop a model for the global oil market and integrate this within a compact quarterly model of the global economy to illustrate how our multi-country approach to modelling oil markets can be used to identify country-specific oil-supply shocks. On the empirical side, estimating the GVAR-Oil model for 27 countries/regions over the period 1979Q2 to 2013Q1, we show that the global economic implications of oil-supply ...
Oil, Volatility and Institutions: Cross-Country Evidence from Major Oil Producers
This paper examines the long-run effects of oil revenue and its volatility on economic growth as well as the role of institutions in this relationship. We collect annual and monthly data on a sample of 17 major oil producers over the period 1961-2013, and use the standard panel autoregressive distributed lag (ARDL) approach as well as its cross-sectionally augmented version (CS-ARDL) for estimation. Therefore, in contrast to the earlier literature on the resource curse, we take into account all three key features of the panel: dynamics, heterogeneity and cross-sectional dependence. Our ...
Reforming Fiscal Institutions in Resource-Rich Arab Economies: Policy Proposals
This paper traces the evolution of fiscal institutions of Resource-Rich Arab Economies (RRAEs) over time since their pre-oil days, through the discovery of oil to their build-up of oil exports. It then identifies challenges faced by RRAEs and variations in their severity among the different countries over time. Finally, it articulates specific policy reforms, which, if implemented successfully, could help to overcome these challenges. In some cases, however, these policy proposals may give rise to important trade-offs that will have to be evaluated carefully in individual cases.
Fair weather or foul? the macroeconomic effects of El Niño
This paper employs a dynamic multi-country framework to analyze the international macroeconomic transmission of El Nio weather shocks. This framework comprises 21 country/region-specific models, estimated over the period 1979Q2 to 2013Q1, and accounts for not only direct exposures of countries to El Nio shocks but also indirect effects through third-markets. We contribute to the climate-macroeconomy literature by exploiting exogenous variation in El Nio weather events over time, and their impact on different regions cross-sectionally, to causatively identify the effects of El Nio shocks on ...
COVID-19 Fiscal Support and Its Effectiveness
This paper uses a threshold-augmented Global VAR model to quantify the macroeconomic effects of countries’ discretionary fiscal actions in response to the Covid-19 pandemic and its fallout. Our results are threefold: (1) fiscal policy is playing a key role in mitigating the effects of the pandemic; (2) all else equal, countries that implemented larger fiscal support are expected to experience less output contractions; (3) emerging markets are also benefiting from the synchronized fiscal actions globally through the spillover channel and reduced financial market volatility.
Do Sovereign Wealth Funds Dampen the Negative Effects of Commodity Price Volatility?
This paper studies the impact of commodity terms of trade (CToT) volatility on economic growth (and its sources) in a sample of 69 commodity-dependent countries, and assesses the role of Sovereign Wealth Funds (SWFs) and quality of institutions in their long-term growth performance. Using annual data over the period 1981-2014, we employ the Cross-Sectionally augmented Autoregressive Distributive Lag (CS-ARDL) methodology for estimation to account for cross-country heterogeneity, cross-sectional dependence, and feedback effects. We find that while CToT volatility exerts a negative impact on ...