## The Caribbean and its Linkages with the World: A GVAR Model Approach

_IMF Working Papers, November 27, 2019_

## Source details

**Canonical URL:** [The Caribbean and its Linkages with the World: A GVAR Model Approach](https://www.imf.org/en/publications/wp/issues/2019/11/27/the-caribbean-and-its-linkages-with-the-world-a-gvar-model-approach-47120)

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## Bibliographic details
- Authors: Mauricio Vargas, Daniela Hess
- Published: November 27, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498326766.001

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### Data and model scope
- Uses data from 1980-2017.
- Estimates a Global VAR (GVAR) model taylored for the Caribbean region and its major trading partners, representing altogether around 60 percent of the global economy.
- Model controls for financial variables, exchange rate fluctuations and overall price changes.

### Research design and scenarios
- Provides stilyzed facts of the main interrelations between the Caribbean region and the rest of the world.
- Two case studies quantify the impact of external shocks on Caribbean countries:
  - i) a change in the international price of oil.
  - ii) an increase in the U.S. GDP.
- Results disentangle interacting channels such as flows of tourists, trade of goods, and changes in economic conditions in the largest economies of the globe.

### Key findings
- Caribbean countries are highly exposed to external factors.
- A fall in oil prices has a positive and large impact on most Caribbean countries after controlling for financial variables, exchange rate fluctuations and overall price changes.
- An increase in the U.S. GDP has a positive and large impact on most Caribbean countries after controlling for financial variables, exchange rate fluctuations and overall price changes.

### Subject areas and keywords
- Subject: Commodities, Econometric analysis, Economic sectors, Imports, International trade, Oil, Oil prices, Prices, Tourism, Vector autoregression
- Keywords: Caribbean, ECCU country, ECCU economy, exchange rate, Global, GVAR model, Imports, Oil, oil price drop, Oil prices, shock equivalent, Tourism, Vector autoregression, WP

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- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2019/11/27/the-caribbean-and-its-linkages-with-the-world-a-gvar-model-approach-47120_