Transmission Mechanisms of Economic Shocks in the Eurasian Economic Union

Abstract

Purpose: The goal of the article is to identify the transmission mechanisms of economic shocks in the EAEU, and determine the impact of external shocks on the key macroeconomic indicators. Theoretical framework: While there is a considerable body of literature on the transmission channels of economic shocks, there remains a need for empirical studies to identify the precise impact of these channels on crucial macroeconomic indicators, including but not limited to GDP, public debt, and exchange rates. Design/methodology/approach: In this article, we have identified three primary sources of transmission channels of shocks that affect the EAEU: global economic growth, instability of the international stock market, and volatility in raw material markets. To analyze the impact of these channels on macroeconomic indicators, we developed a panel vector autoregression model using 29 indicators for five countries. The model uses quarterly data from 2010 to 2022. Findings: The study revealed that shocks are transmitted to EAEU economies through several channels, including the exchange rate, foreign trade, foreign investments, budget indicators, and inflation. The impacts of changes in raw asset prices and global financial market conditions are observable across all these channels. Ultimately, all shocks have an impact on the rate of economic growth, as well as the government's debt burden. Research, Practical & Social implications: We are proposing a new research agenda and direction, emphasizing the need for empirical studies that align with the economic policy of integration. Such studies will be essential in advancing our understanding of the transmission mechanisms of economic shocks and their impact on the EAEU. Originality/value: Although there are analyses of how economic shocks are transmitted within specific countries, the significance of this research is emphasized by its examination of the EAEU as a cohesive entity.