External shocks in the world economy: a SVAR approach

Abstract

This research quantifies and compares the effects of shocks to U.S. GDP growth, Chinese GDP and commodity prices on the economic growth rates of four regions: i) Latin America and the Caribbean (LAC), ii) the European Union (EU), iii) ASEAN-5 and iv) Middle East and Central Asia (MECA), during the period 1983-2023. To this end, a SVAR (Structural Autoregressive Model) model with long-run restrictions is estimated for each region. The results indicate that external shocks significantly impact the economies of LAC, EU, ASEAN-5 and MECA, with regional variations in direction and magnitude. One limitation is the exclusion of economies such as India, Russia and Japan. This paper is the first study to address the impact of these shocks at the regional level within the global context.