## International Spillovers of Macroeconomic Shocks: A Quantitative Exploration

_IMF Working Papers, June 1, 2000_

## Source details

**Canonical URL:** [International Spillovers of Macroeconomic Shocks: A Quantitative Exploration](https://www.imf.org/en/publications/wp/issues/2016/12/30/international-spillovers-of-macroeconomic-shocks-a-quantitative-exploration-3596)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/30/international-spillovers-of-macroeconomic-shocks-a-quantitative-exploration-3596/index.md)
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## Bibliographic details
- Authors: Douglas Laxton, Eswar S Prasad
- Published: June 1, 2000
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451852509.001

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### Summary
- This paper provides a quantitative exploration of international spillovers of macroeconomic shocks among the major industrial economies.
- The topical example analyzed concerns the possible effects on the industrial economies of adverse shocks to the current U.S. economic expansion.
- The potential spillover effects of U.S. shocks to other industrial economies are found to be quite large.
- Extant economic conditions, particularly the low levels of nominal interest rates and the consequent possibility of liquidity traps in countries such as Japan, could significantly magnify these spillover effects.

### Key findings and projections
- Spillover magnitude:
  - Potential spillover effects from adverse U.S. shocks to other industrial economies are characterized as "quite large."
- Role of nominal interest rates:
  - Low levels of nominal interest rates in some countries (explicitly mentioning Japan) increase the likelihood of liquidity traps.
  - Liquidity traps can significantly magnify international spillovers from U.S. shocks.
- Topical focus:
  - The analysis centers on adverse shocks to the U.S. economic expansion and their transmission to other major industrial economies.

### Methodology and scope
- Nature of paper:
  - A quantitative exploration using macroeconometric simulations (keyword appears in source).
- Geographic coverage:
  - Major industrial economies; specific country example highlighted: Japan.
- Subjects and key terms emphasized in the analysis:
  - Balance of payments, Current account balance, Foreign exchange, Inflation, Interest rate floor, Labor, Monetary policy, Nominal effective exchange rate, Prices, Unemployment rate.
- Keywords (as listed):
  - choice of inflation target, closed economy, Current account balance, economy, GDP ratio, Global, Inflation, inflation environment, inflation rate, inflation-unemployment trade-off, int. rate, Interest rate floor, international spillovers, macroeconometric simulations, Macroeconomic shocks, monetary policy, Nominal effective exchange rate, nominal interest rate, nominal interest rate floor, price level, Unemployment rate, United States economy, WP

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## Content in this bundle

- **International Spillovers of Microeconomic Shocks: A Quantitative Exploration - WP/00/101**
  - [International Spillovers of Microeconomic Shocks: A Quantitative Exploration - WP/00/101 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2000/_wp00101.pdf.md){rel="alternate" type="text/markdown"}
  - [International Spillovers of Microeconomic Shocks: A Quantitative Exploration - WP/00/101 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2000/_wp00101.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/international-spillovers-of-macroeconomic-shocks-a-quantitative-exploration-3596_