Systemic Risk, Aggregate Demand, and Commodity Prices

Javier Gómez-Pineda, Dominique Guillaume and Kadir Tanyeri

No 2015/165, IMF Working Papers from International Monetary Fund

Abstract: The paper presents a global model with systemic and country risks, as well as commodity prices.We show that systemic risk shocks have an important impact on world economic activity, with the busts in world output gap corresponding to unobserved systemic risk associated with major financial events. In addition, systemic risk shocks are shown to be important drivers of output gaps while country risk premium shocks can have important effects on the trade balance. Commodity prices, in particular the price of oil, are shown to be demand driven. The model performs well at one- and four-quarter horizons compared to a survey of analysts' forecasts. In addition, systemic risk shocks explain a large share of the forecast variance for the world output gap, country output gaps, the price of oil, and country risk premiums. The importance of systemic risk shocks lends support for financial surveillance with a systemic focus.

Keywords: WP; Systemic risk; Financial linkages; Capital flows; Global imbalances Commodity prices; country risk risk premium; world output gap; trade balance gap; premium shock; country output gaps; Return on investment; Output gap; Trade balance; Food prices; Global; East Asia; Europe (search for similar items in EconPapers)
Pages: 52
Date: 2015-07-20
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Systemic Risk, Aggregate Demand, and Commodity Prices (2015)
Working Paper: Systemic Risk, Aggregate Demand, and Commodity Prices (2015)
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