How Resilient Is the U.S. Economy to Foreign Disturbances?

We assess the relative importance of domestic and foreign disturbances in explaining fluctuations key macroeconomic variables find that both types shocks are equally important. reach this conclusion within a constructed two-sector open economy DSGE model context, where we isolate contributions each group to post-WWII U.S. business cycles. Our approach is apply indirect inference method test model’s fit against four-equation VAR(1) output, real exchange rate, energy use, consumption. main result pivotal driving movements these home variables; accounting for 38% variability aggregate 73% variation 45% variance 84% volatility Further, also identified be crucial some other variables, larger fractions changes investment, labour hours, interest rate. However, appears resilient with respect certain particular, exports, imports, wages, absorption.