This paper studies how the Trans-Pacific region affects the US economy in terms of business cycle transmission. We use a large data set consisting of disaggregated sectoral industrial production indexes from selected countries in the region and employ a factor-augmented vector autoregression (FAVAR) approach to analyze the transmission of shocks in different industries. We find that a positive output shock in the entire Trans-Pacific region has positive effects on the majority of US manufacturing sectors. We also find that sectoral shocks in five sectors of the Trans-Pacific region have a large impact on the overall US economy. Three of the five sectors displayed strong same-sector responses relative to the overall response, suggesting that vertical production linkages might play a key role in the transmission of shocks. Our results highlight the importance of examining industrial sectors in studying the transmission of shocks in the Trans-Pacific region.
0000-0001-9916-6008 (Takeshi Yagihashi) 0000-0002-2241-3282 (David Selover)
Original Publication Citation
Yagihashi, T., & Selover, D. D. (2017). How do the Trans-Pacific economies affect the USA? An industrial sector approach. World Economy, 40(10), 2097-2124. doi:10.1111/twec.12471
Yagihashi, Takeshi and Selover, David D., "How Do The Trans-Pacific Economies Affect the USA? An Industrial Sector Approach" (2017). Economics Faculty Publications. 27.