Trade shocks and macroeconomic fluctuations in Africa

This paper examines the role of external shocks in explaining macroeconomic fluctuations in African countries. We construct a quantitative, stochastic, dynamic, multi-sector equilibrium model of a small open economy calibrated to represent a “typical” African country. External shocks consist of trad...

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Bibliographic Details
Published inJournal of development economics Vol. 65; no. 1; pp. 55 - 80
Main Authors Kose, M.Ayhan, Riezman, Raymond
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.06.2001
Elsevier
Elsevier Sequoia S.A
SeriesJournal of Development Economics
Subjects
Africa
African economies
Developing countries
Dynamic stochastic quantitative trade model
Economic fluctuations
Economic theory
International trade
LDCs
Macroeconomics
Stochastic models
Studies
Trade
Trade models
Trade shocks
Africa
F41
E31
E32
D58
Trade shocks
African economies
F11
Dynamic stochastic quantitative trade model
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Summary:This paper examines the role of external shocks in explaining macroeconomic fluctuations in African countries. We construct a quantitative, stochastic, dynamic, multi-sector equilibrium model of a small open economy calibrated to represent a “typical” African country. External shocks consist of trade shocks, modeled as fluctuations in the prices of exported primary commodities, imported capital goods and intermediate inputs, and a financial shock, modeled as fluctuations in the world real interest rate. Trade shocks account for roughly half of economic fluctuations in aggregate output. Moreover, adverse trade shocks cause prolonged recessions since they induce a significant decrease in aggregate investment.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0304-3878
1872-6089
DOI:10.1016/S0304-3878(01)00127-4