Briefing
How Does Trade Impact the Way GDP Growth and Inflation Comove Across Countries?
Ho, Paul; Sarte, Pierre-Daniel G.; Schwartzman, Felipe (2023-01)
Seemingly small international trade linkages can lead to substantial spillovers across countries, going a long way in explaining the well-documented global comovement in GDP growth and inflation across countries. The spillovers come largely from indirect effects, with shocks in a foreign country not only propagating to the domestic economy directly but also cumulating through the trade network via other foreign countries. We develop and estimate a model incorporating these network effects, and we find that inflationary shocks in Europe have substantial effects on U.S. inflation and that U.S. ...
Richmond Fed Economic Brief , Volume 23 , Issue 1