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The recent financial crisis raises important issues about the transmission of financial shocks across borders. In this paper, a global vector autoregressive (GVAR) model is constructed to assess the relevance of international spillovers following a historical slowdown in U.S. equity prices. The GVAR model contains 27 country-specific models, including the United States, 17 European advanced economies, and 9 European emerging economies. Each country model is linked to the others by a set of country-specific foreign variables, computed using bilateral bank lending exposures. Results reveal considerable comovements of equity prices across mature financial markets. However, the effects on credit growth are found to be country-specific. Evidence indicates that asset prices are the main channel through which-in the short run-financial shocks are transmitted internationally, while the contribution of other variables-like the cost and quantity of credit-becomes more important over longer horizons.

Finance --- Business & Economics --- International Finance --- Capital movements --- Econometrics. --- Econometric models. --- Capital flight --- Capital flows --- Capital inflow --- Capital outflow --- Flight of capital --- Flow of capital --- Movements of capital --- Economics, Mathematical --- Statistics --- Balance of payments --- Foreign exchange --- International finance --- Banks and Banking --- Econometrics --- Investments: Stocks --- Money and Monetary Policy --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- State Space Models --- General Aggregative Models: Forecasting and Simulation --- Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Interest Rates: Determination, Term Structure, and Effects --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Econometrics & economic statistics --- Investment & securities --- Monetary economics --- Banking --- Vector autoregression --- Stocks --- Interbank rates --- Credit --- Econometric analysis --- Financial institutions --- Financial services --- Money --- Foreign banks --- Interest rates --- Banks and banking --- Banks and banking, Foreign --- United States

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This paper provides an overview of the potential macroeconomic effects of HIV/AIDS in Botswana, focusing on the key channels through which the pandemic is likely to affect the economic outlook and on the uncertainties involved. To estimate the impact of HIV/AIDS, a dual-economy equilibrium model is constructed and simulated under different scenarios. Depending on exactly how AIDS affects the outlook, GDP growth is projected to fall from around 5½ percent a year without the pandemic to between 1½ and 2½ percent a year with AIDS. Non-negligible redistribution effects across sectors and labor skill categories are also likely to arise. Finally, the paper draws attention to the potential effects of HIV/AIDS on the long-term fiscal position of Botswana, highlighting the need for increased international support and/or lower drug prices so that the widespread introduction of anti-retroviral drug treatments is feasible.

Investments: General --- Labor --- Public Finance --- Diseases: AIDS and HIV --- Production and Operations Management --- One, Two, and Multisector Growth Models --- Economywide Country Studies: Africa --- Demographic Trends, Macroeconomic Effects, and Forecasts --- Health Behavior --- Wages, Compensation, and Labor Costs: General --- National Government Expenditures and Health --- Investment --- Capital --- Intangible Capital --- Capacity --- Demand and Supply of Labor: General --- Production --- Cost --- Capital and Total Factor Productivity --- HIV/AIDS --- Labour --- income economics --- Public finance & taxation --- Macroeconomics --- HIV and AIDS --- Wages --- Health care spending --- Capital accumulation --- Labor markets --- Health --- Expenditure --- National accounts --- Total factor productivity --- HIV --- Viruses --- Expenditures, Public --- Saving and investment --- Labor market --- Industrial productivity --- Botswana

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Italy’s deep-rooted structural problems resulted in an unsatisfactory productivity performance and a dismal growth over the last 15 years. The global financial crisis has exacerbated these long-standing weaknesses, taking a heavy toll on Italy’s economy. With output back to its end-2001 level, Italy’s output losses associated with the crisis have been, thus far, about 132 billion of 2000 euro (around 10 percent of precrisis 1998 - 2004 real GDP). About three quarters of these losses are estimated to be due to a shortfall in potential output. Potential output is not expected to rebound to its precrisis trend over the medium term, even though growth is projected to do so within the next two years. In the short-run, the decline in output is mainly accounted for by a collapse in productivity; in the medium term, employment and capital are also likely to be affected, with implications for the longer-term growth and fiscal outlook.

Global Financial Crisis, 2008-2009. --- Financial crises --- Crashes, Financial --- Crises, Financial --- Financial crashes --- Financial panics --- Panics (Finance) --- Stock exchange crashes --- Stock market panics --- Crises --- Global Economic Crisis, 2008-2009 --- Subprime Mortgage Crisis, 2008-2009 --- Macroeconomics --- Production and Operations Management --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- Macroeconomics: Production --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Labor Economics: General --- Labour --- income economics --- Total factor productivity --- Capital productivity --- Output gap --- Labor --- Potential output --- Industrial productivity --- Economic theory --- Labor economics --- Italy

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Policymakers have relied on a wide range of policy tools to cope with capital flow shocks. And yet, the effects and interaction of these policies remain under debate, as does the motivation for using them. In this paper, quantile local projections are used to estimate the entire distribution of future policy responses to portfolio flow shocks for 20 emerging markets and understand the variety of policy choices across the sample. To assuage endogeneity concerns, estimates rely on the fact that global capital flows are exogenous from the viewpoint of any one of these countries. The paper finds that: (i) policy responses to capital flow shocks are heterogeneous across countries, fat-tailed—“extreme” responses tend to be more elastic than “typical” responses—and asymmetric—“extreme” responses tend to be more elastic with respect to outflows than to inflows; (ii) country characteristics are linked to policy choices—with cross-country differences in forex intervention relating to the size of balance sheet vulnerabilities and the depth of the forex market; (iii) the use of targeted macroprudential policy and capital flows management measures can help “free the hands” of monetary policy by allowing it to focus more squarely on domestic cyclical developments.

Peru --- Banks and Banking --- Exports and Imports --- Foreign Exchange --- Current Account Adjustment --- Short-term Capital Movements --- Monetary Policy --- Financial Institutions and Services: Government Policy and Regulation --- International Investment --- Long-term Capital Movements --- Interest Rates: Determination, Term Structure, and Effects --- Currency --- Foreign exchange --- International economics --- Banking --- Exchange rates --- Capital flows --- Exchange rate adjustments --- Central bank policy rate --- Balance of payments --- Financial services --- Capital movements --- Interest rates