@misc{12749,
title = {World Shocks, World Prices, and Business Cycles : An Empirical Investigation},
author = {Fernandez, Andres and Schmitt-Grohé, Stephanie and Uribe, Martin},
year = {2017},
doi = {10.18235/0000721},
abstract = {SVAR models that include a single world price (such as the terms-of-trade) predict that world shocks explain a small fraction of movements in domestic output (typically less than 10 percent).  This paper presents an empirical framework in which multiple commodity prices transmit world disturbances.  Estimates on a panel of 138 countries over the period 1960-2015 indicate that world shocks explain on average 33 percent of output fluctuations in individual economies.  This figure doubles when the model is estimated on post-2000 data.  The findings reported here suggest that one-world-price specifications significantly underestimate the importance of world shocks for domestic business cycles.},
url = {https://doi.org/10.18235/0000721}
}