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Common shocks (to whole countries or global industries) explain only 45% of the variations.
But they too rehash events and end up blaming "risk repricing," contagion, common shocks, panics and bubbles, and fail to delve into all the root causes.
Common shocks, such as the decline of traditional production industries, demographic shifts, new information technologies, climate change, invasive species, and demand for new energy resources, unite these areas.
In view of these results, we create the regional specific variables allowing regions to respond differently to common shocks.
This removes trends that are common to all countries and allows the focus on asymmetric (rather than common) shocks.
We include country and year fixed effects to control for country-specific averages of omitted institutions and for common shocks across countries (Bassanini and Duval 2006).
Similar(40)
The collapse of the Nasdaq became a common shock -- not unlike the oil shock of the 1970's -- that punished risk-takers everywhere.
It might not be used in a crisis period in which there is widespread insolvency, either from a common shock to banks or common bad behaviour by banks.
Global recessions are seldom spread through trade linkages, but by a common shock, such as a financial crisis or a sharp jump in oil prices.
Such tragedies and even the selling of children for marriage or as bonded labour – a common shock-horror news story in India – are the most dramatic results.
When a large part of the financial sector is funded with fragile, short-term debt and is hit by a common shock to its long-term assets, there can be en masse failures of financial firms and disruption of intermediation to households and firms.
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