## 2005. We consider the South to be composed of two groups of countries, the Emerging South

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### Key findings on growth linkages and globalization (1960–2005)
- Using a panel regression framework, the impact of Northern economic activity on the Emerging South has declined during the globalization period (1986–2005).
- Growth linkages between the North and Developing South have been rather stable over time.
- The North and Emerging South economies have started to exhibit more intensive intra-group growth spillovers.
- Contribution to world GDP growth (period averages):
  - North: 1960-1972 = 74.00; 1973-1985 = 48.86; 1986-2005 = 44.62
  - Emerging South: 1960-1972 = 22.34; 1973-1985 = 46.36; 1986-2005 = 51.84
  - Developing South: 1960-1972 = 3.66; 1973-1985 = 4.77; 1986-2005 = 3.53

### Sample, groups, and periods
- Sample: 106 countries, 1960–2005.
- Group definitions:
  - North = 23 “core” OECD countries.
  - Emerging South = 23 emerging markets.
  - Developing South = 60 developing countries.
- Time sub-periods used:
  - 1960–72 (Bretton Woods fixed exchange rate regime).
  - 1973–85 (common shock period).
  - 1986–2005 (globalization period).

### Evolution of size, trade, sectoral composition, and financial linkages
- Size distribution (in percent, period averages):
  - North: 1960-1972 = 73.40; 1973-1985 = 70.25; 1986-2005 = 62.38
  - Emerging South: 1960-1972 = 22.03; 1973-1985 = 25.41; 1986-2005 = 33.74
  - Developing South: 1960-1972 = 4.57; 1973-1985 = 4.34; 1986-2005 = 3.88
- Trade openness (total trade/GDP) changes during globalization:
  - Emerging South: 28 percent → 78 percent.
  - North: 26 percent → 46 percent.
  - Developing South: openness ratio relatively stable.
- Emerging South export composition (merchandise, in percent):
  - Primary Non-fuels: 1960-1972 = 60.80; 1973-1985 = 37.76; 1986-2005 = 17.05
  - Primary Fuels: 1960-1972 = 16.78; 1973-1985 = 23.65; 1986-2005 = 9.00
  - Manufacturing: 1960-1972 = 23.33; 1973-1985 = 38.59; 1986-2005 = 73.95
- Intra-group and South-South trade:
  - Share of intra-group trade in Emerging South’s total trade: 9 percent (1960) → 36 percent (2005).
  - Share of Emerging South trade with the North: 83 percent (1960) → 50 percent (2005).
  - Share of total world trade directed towards the Emerging South: 14 percent (1985) → 25 percent (2005).
- Financial linkages and composition:
  - Fraction of countries with liberalized financial systems increased sharply in the globalization period.
  - Gross stocks of assets and liabilities of the Emerging South rose by more than fivefold during the globalization period.
  - Emerging South foreign assets/liabilities composition shifts:
    - Share of debt: 80 percent → 50 percent.
    - Share of FDI and portfolio equity: 13 percent → 40 percent.
  - Intra-South FDI flows increased threefold over 1995–2003.
  - Share of flows from the Emerging South in total FDI flows to the Developing South: 16 percent (1995) → 36 percent (2003).
- China and India (share of world GDP):
  - China: 3.17 percent (Bretton Woods) → 9.79 percent (globalization period).
  - India: 4.36 percent (Bretton Woods) → 5.61 percent (globalization period).

### Stylized facts on correlations, convergence, and divergence
- Cross-group correlations (output-weighted indices):
  - North–Emerging South GDP correlation: 1960-1972 = 0.23; 1973-1985 = 0.42; 1986-2005 = 0.07
  - North–Developing South GDP correlation: 1960-1972 = 0.32; 1973-1985 = 0.27; 1986-2005 = 0.20
  - Emerging South–Developing South GDP correlation: 1960-1972 = 0.75; 1973-1985 = 0.31; 1986-2005 = 0.18
- Average bilateral correlations (North vs. Emerging South trading partners):
  - GDP correlations: 1960–72 = 0.17 → globalization period = -0.09 (average reported elsewhere as GDP: 1960-1972 = 0.12; 1973-1985 = 0.34; 1986-2005 = -0.07 when output-weighted).
  - Industrial output correlations: 1960–72 = 0.31 → globalization period = -0.02.
- Intra-group correlations (convergence within groups):
  - North intra-group (GDP growth): 1960-1972 = 0.26 → 1986-2005 = 0.53 (trade-weighted correlations).
  - Emerging South intra-group (output weighted GDP): 1960-1972 = 0.10; 1973-1985 = 0.22; 1986-2005 = 0.39
  - Emerging South intra-group GDP growth: 1960-1972 = 0.01 → 1986-2005 = 0.35 (average bilateral series).

### Benchmark panel regressions — framework and key coefficients
- Regression setup:
  - Dependent variable yi,t = 5-year average growth rate (GDP, industry, services, agriculture).
  - Nine 5-year panels over 1960–2005.
  - Key regressors: N i,t (trade-weighted Northern index), ES i,t (trade-weighted Emerging South index).
  - Controls X i,t: log initial per capita GDP (PPP), population growth, investment/GDP, government spending/GDP, human capital (fraction over 15 with secondary attainment), log average inflation.
  - Time variation via interaction with Dpre-globalization (dummy = 1 for 1960–1985).
- Selected pooled OLS coefficient estimates (Table 10; point estimates and significance):
  - Northern GDP (coefficients):
    - Whole Sample = 0.589***
    - North = 0.744***
    - Emerging South = 0.344*
    - Developing South = 0.448***
  - Northern GDP * D pre-globalization:
    - Whole Sample = 0.00448
    - North = -0.537**
    - Emerging South = 0.412**
    - Developing South = -0.0845
  - Emerging South GDP (coefficients):
    - Whole Sample = 0.173**
    - North = -0.158
    - Emerging South = 0.355***
    - Developing South = 0.0788
  - Emerging South GDP * D pre-globalization:
    - Whole Sample = 0.0495
    - North = 0.195
    - Emerging South = -0.122
    - Developing South = 0.107
- Interpretation of key impacts (globalization period unless specified):
  - World:
    - A one percentage point increase in Northern index growth → approximately 0.6 percentage points increase in GDP growth of the rest of the world.
    - A one percentage point increase in Emerging South index growth → roughly 0.2 percentage points increase in GDP growth of the rest of the world.
  - North internal spillovers:
    - A one percentage point increase in Northern GDP growth → 0.75 percentage points increase in average GDP growth of a typical North economy (globalization period).
    - This 0.75 percentage points impact is about 0.54 percentage points higher than in the pre-globalization period.
  - Emerging South internal spillovers:
    - A one percentage point increase in Emerging South growth → 0.35 percentage points increase in Emerging South GDP growth (globalization period).
  - Cross-group spillovers:
    - Northern impact on Emerging South:
      - A one percentage point increase in Northern GDP growth → 0.34 percentage points increase in Emerging South GDP growth (globalization period).
      - This 0.34 percentage points is 0.41 percentage points lower than the pre-globalization effect (implying pre-globalization Northern impact on Emerging South ≈ 0.75 percentage points).
    - Northern impact on Developing South:
      - A one percentage point increase in Northern GDP growth → 0.45 percentage points increase in Developing South GDP growth (impact stable over time).
- Regression diagnostics (benchmark GDP regressions):
  - Observations: Whole Sample = 803; North = 198; Emerging South = 192; Developing South = 413
  - R-squared: Whole Sample = 0.25; North = 0.56; Emerging South = 0.43; Developing South = 0.21

### Sectoral spillovers (industry, services, agriculture)
- Industry (5-year averages):
  - Whole Sample: Northern Industry = 0.572***; Emerging South Industry = 0.160*.
  - North intra-group: a one percentage point increase in Northern industrial growth → slightly more than 0.6 percentage points increase in Northern industrial growth; impact about 0.35 percentage points higher during globalization period (change not significant).
  - Emerging South intra-group: a one percentage point increase in Emerging South industrial output → 0.20 percentage points increase in Emerging South industrial growth; this impact has not changed over time.
  - Cross-group: a one percentage point increase in Northern industrial growth → 0.40 percentage points increase in Emerging South industrial growth; this impact is two times higher in the pre-globalization period.
- Services:
  - Northern services growth has a statistically significant intra-group spillover increase; Northern services impact on Emerging South services was significant in pre-globalization but insignificant in globalization.
- Agriculture:
  - No noticeable temporal pattern in agricultural growth spillovers.
- Appendix IIB sectoral regression diagnostics and coefficients reported for Whole Sample, North, Emerging South, Developing South (see Industry, Services, Agriculture tables for full values).

### Robustness checks and extensions
- Robustness methods:
  - Controls added for export structure (manufacturing exports), trade openness (Ave_sachswarner), financial openness (FDI-Portfolio liabilities/GDP), and common shocks (oil price changes).
  - Outlier treatments: iteratively re-weighted least squares; excluding observations two standard deviations from mean growth.
  - Regional analyses for Asia and Pacific (AP) and Latin America and the Caribbean (LAC).
- Key robustness findings:
  - Inclusion of controls does not affect qualitative findings; magnitudes change modestly.
  - Manufacturing exports significantly impact GDP and sectoral growth for whole sample and Emerging South.
  - Trade openness positively impacts GDP, industry and services growth of Developing South and GDP and services growth of North.
  - Financial openness has positive impact on North; impact on Emerging South is either statistically insignificant for GDP and services growth or negative for industry growth.
  - Oil price changes positively affect Developing South growth.
- Regional results:
  - Asia-Pacific:
    - Northern GDP, industry, services growth impact on AP declined during globalization.
    - A one percentage point increase in Emerging Southern GDP growth → 0.35 points increase in AP region growth during globalization; this impact is 0.27 points higher relative to pre-globalization.
  - Latin America and the Caribbean:
    - Northern GDP and sectoral growth significantly affect LAC during globalization; no clear strengthening over time.
    - Emerging Southern industrial growth significantly impacts LAC industrial production during globalization.

### Implications for the decoupling debate, policy and theory
- Decoupling evidence:
  - The impact of the North on Emerging South countries has been declining over the past two decades, providing partial support for decoupling of business cycles of Emerging South from advanced countries in the North (results also valid for AP region).
  - No significant change in North–Developing South linkages.
  - Caveat: results cover a group of advanced Northern countries, not just the United States; spillover magnitudes may differ in full U.S. recessions versus mid-cycle slowdowns.
- Policy implications:
  - Macroeconomic policy design and international coordination should reflect increased intra-group spillovers in North and Emerging South and rising interdependence across groups.
  - Small open economies whose growth is driven by external factors should prioritize domestic macroeconomic fundamentals, efficient markets, and institutional quality to mitigate adverse external shocks.
  - On international coordination: growing goods and asset market integration may increase need for coordination per trade-multiplier models, but increased financial integration and risk sharing may reduce need for monetary policy coordination; policymakers should address domestic market distortions and rigidities.
- Theoretical implications:
  - Traditional unidirectional North→South models increasingly fail to capture observed multidimensional interdependence, sectoral shifts, intra-industry trade, and changing capital flow composition.
  - Recent modeling efforts attempt to capture these features but remain incomplete relative to documented stylized facts.

### Selected detailed statistics (preserve exact values)
- Average growth rates of GDP (in percent):
  - North GDP: 1960-1972 = 4.89; 1973-1985 = 2.82; 1986-2005 = 2.63
  - Emerging South GDP: 1960-1972 = 5.15; 1973-1985 = 5.00; 1986-2005 = 5.63
  - Developing South GDP: 1960-1972 = 4.11; 1973-1985 = 3.14; 1986-2005 = 3.24
- Sectoral world averages (value-added shares, in percent):
  - Agriculture: 1960-1972 = 5.67; 1973-1985 = 4.41; 1986-2005 = 3.91
  - Industry: 1960-1972 = 32.98; 1973-1985 = 31.86; 1986-2005 = 29.59
  - Services: 1960-1972 = 61.39; 1973-1985 = 63.73; 1986-2005 = 66.51
- Intra-industry trade intensity (examples, Grubel-Lloyd Index):
  - USA: 1970-79 = 0.484; 1980-89 = 0.502; 1990-99 = 0.602
  - China: 1970-79 = 0.099; 1980-89 = 0.141; 1990-99 = 0.268
  - India: 1970-79 = 0.125; 1980-89 = 0.101; 1990-99 = 0.201
  - Brazil: 1970-79 = 0.172; 1980-89 = 0.217; 1990-99 = 0.275

### Data, methodology, and model diagnostics
- Dependent variables: 5-year averages of annual real GDP growth and sectoral value-added growth.
- Estimation: pooled OLS with heteroscedasticity-consistent robust standard errors; *, **, *** indicate significance at 10 percent, 5 percent, and 1 percent respectively.
- Appendix III and IVA provide full-model coefficients, regional extensions, observations and R-squared values for alternative specifications and robustness checks.

*Source: IMF Working Paper _wp07280 — “Growth Impact of the Emerging South” (chapter and appendices excerpt).*

### 2005. We consider the South to be composed of two groups of countries, the Emerging South

### _wp07280 - 2005. We consider the South to be composed of two groups of countries, the Emerging South

### Summary findings
- Using a panel regression framework, the impact of Northern economic activity on the Emerging South has declined during the globalization period (1986–2005).
- Growth linkages between the North and Developing South have been rather stable over time.
- The North and Emerging South economies have started to exhibit more intensive intra-group growth spillovers.

### Classification and keywords
- South partitioned into two groups: Emerging South and Developing South, based on the extent of their integration into the global economy.
- JEL Classification Numbers: F15, F42, F43
- Keywords: Business cycles, emerging markets, growth linkages, north, south, globalization, decoupling, divergence, convergence.

### Authors and acknowledgements
- Author contact E-Mail Addresses: cigdem@gwu.edu; akose@imf.org
- Çiğdem Akın is with George Washington University.
- Acknowledged contributions from: Michael Plummer; two anonymous referees; Peter Berezin; Stijn Claessens; Selim Elekdağ; Thomas Helbling; Hideaki Hirata; Rolf Langhammer; Jong-Wha Lee; Eswar Prasad; Tara Sinclair; Nikola Spatafora; Marco Terrones; Kamil Yılmaz; Kei-Mu Yi.
- Dionysios Kaltis provided research assistance.
- A slightly shorter version of this paper will soon be published in the Journal of Asian Economics.

### Methodology overview
- Empirical approach: panel regression framework.
- Time period emphasized for the globalization episode: 1986–2005.
- Measures of aggregate activity discussed in the document include an Output-Weighted Index and a Trade-Weighted Index (section headings indicate comparison and rationale).

### Main analytical themes (from table of contents)
- Characterizing North-South economic linkages over time.
- Quantifying extent of linkages between the North and South.
- Determining underlying forces of business cycle co-movement.
- Evolution of international economic linkages: changes in size distribution of countries; dynamics of trade and sectoral output; nature of trade; South-South trade linkages; changes in financial linkages and financial openness.
- How to characterize North-South linkages: theory and evidence.
- Understanding growth linkages: measurement of aggregate economic activity; stylized facts about growth linkages including cross-group correlations (divergence across groups) and intra-group correlations (convergence within groups).
- Quantifying growth spillovers: benchmark regressions for output growth spillovers and sectoral growth spillovers; robustness exercises including controlling for export structure, openness, and common shocks and growth spillovers across geographical regions.

### Key empirical outputs and inventories (as listed)
- Tables include: Size Distribution of Groups; Average Growth Rates of Macroeconomic and Sectoral Aggregates; Changes in the Sectoral Composition; Changes in the Composition of Trade; Intra-Industry Trade Intensity; Contribution to World GDP Growth; Cross-Group Correlations; Correlations between North and Emerging South; Intra-Group Correlations; Benchmark GDP Growth Regressions.
- Figures include: Evolution of Trade and Financial Liberalization; Trade Openness; Direction of Trade Flows; Financial Integration; Composition of Financial Assets and Liabilities; Comparison of Group-Wide GDP Indices; Comparison of Trade Weighted Emerging South GDP Growth across Different [measures]; Growth Impact of the North.

### Robustness and extensions (document signals)
- Robustness exercises are reported, including:
  - Controlling for export structure, openness, and common shocks.
  - Growth spillovers across geographical regions.
- Sectoral analyses reported: sectoral growth spillovers and changes in sectoral composition.

*Source: _wp07280 - 2005. We consider the South to be composed of two groups of countries, the Emerging South*

### 7. Growth Impact of the Emerging South ................................................................................4

### _wp07280 - 7. Growth Impact of the Emerging South

### I. Introduction and scope
- Sample and period:
  - Comprehensive dataset of 106 countries covering the 1960–2005 period.
  - World divided into three groups: North (23 “core” OECD countries), Emerging South (23 emerging markets), Developing South (60 developing countries).
- Questions addressed:
  - How have economic linkages between the North and South changed over time?
  - What are the implications for transmission of macroeconomic fluctuations?
  - How have dynamics of growth spillovers between the North and South been affected by changing international linkages?
- Time sub-periods used for analysis:
  - 1960–72 (Bretton Woods fixed exchange rate regime).
  - 1973–85 (common shock period: oil shocks in the 1970s and contractionary monetary policies in major industrial economies in the early 1980s).
  - 1986–2005 (globalization period: large increases in trade and financial flows).

### II. Evolution of international economic linkages — size, trade, and sectoral shifts
- Size distribution and growth:
  - During 1960–85: North constituted more than 70 percent of world GDP (PPP terms); Emerging South roughly 25 percent.
  - Globalization period (1986–2005): Emerging South share increased to 34 percent; Northern share decreased to 62 percent.
  - Average growth in Emerging South has been more than two times faster than in the North during the globalization period.
  - China’s share of world GDP: 3.17 percent (Bretton Woods) → 9.79 percent (globalization period).
  - India’s share of world GDP: 4.36 percent (Bretton Woods) → 5.61 percent (globalization period).
- Trade openness and composition:
  - Trade openness (total trade/GDP) changes during globalization:
    - Emerging South: 28 percent → 78 percent.
    - North: 26 percent → 46 percent.
    - Developing South: openness ratio relatively stable.
  - Composition of Emerging South exports:
    - Commodities share declined from 60 percent (Bretton Woods) to 17 percent (globalization period).
    - Manufacturing exports rose to 74 percent of total exports (globalization period).
  - Intra-industry trade intensity (Grubel-Lloyd index) increased among G-7 and between Emerging South and G-7 since 1970.
- Direction of trade and South-South trade:
  - Share of total world trade directed towards the Emerging South: 14 percent (1985) → 25 percent (2005).
  - Emerging South share of total Northern trade: 13 percent (1985) → 21 percent (2005).
  - Share of intra-group trade in Emerging South’s total trade: 9 percent (1960) → 36 percent (2005).
  - Share of Emerging South trade with the North: 83 percent (1960) → 50 percent (2005).
  - China-related intra-regional trade in emerging Asia grew by 12 times over 1990–2006 and accounted for roughly 60 percent of intraregional trade within emerging Asia (1990-2006 reference).
- Financial linkages:
  - Fraction of countries with liberalized financial systems increased sharply in the globalization period.
  - Gross stocks of assets and liabilities of the Emerging South rose by more than fivefold during the globalization period.
  - Composition shifts for the Emerging South’s foreign assets/liabilities:
    - Share of debt declined from 80 percent → 50 percent.
    - Share of FDI and portfolio equity rose from total 13 percent → 40 percent.
  - Intra-South FDI flows increased threefold over 1995–2003.
  - Share of flows from the Emerging South in total FDI flows to the Developing South: 16 percent (1995) → 36 percent (2003).

### III. Stylized facts on growth correlations and convergence/divergence
- Cross-group correlations (output-weighted indices):
  - Correlation between Northern GDP and Emerging Southern GDP:
    - Increased during common shock period relative to Bretton Woods, then declined in the globalization period.
    - Specific decline example: correlation of Northern GDP and Emerging Southern GDP decreased from 0.42 (common shock period) to 0.07 (globalization period).
  - Correlation of group-wide industrial output between North and Emerging South decreased from 0.63 (common shock period) to 0.22 (globalization period).
  - Emerging South has differentiated from Developing South: Emerging–Developing correlations decreased over time.
- Average bilateral correlations (North countries vs. Emerging South trading partners):
  - GDP (industrial output) correlations for North countries with Emerging South trading partners:
    - Average GDP correlation declined from 0.17 (1960–72) to -0.09 (globalization period).
    - Average industrial output correlation declined from 0.31 (1960–72) to -0.02 (globalization period).
- Intra-group correlations (convergence within groups):
  - North intra-group:
    - Average correlation of Northern countries’ GDP growth with Northern trading partners: 0.26 (1960–72) → 0.53 (globalization period).
    - Industrial growth average correlation: 0.48 (1960–72) → 0.53 (globalization period).
  - Emerging South intra-group:
    - Average intra-group correlation of GDP growth: 0.01 (1960–72) → 0.35 (globalization period).
    - Industrial output correlations: -0.09 (1960–72) → 0.31 (globalization period).
- Summary of stylized facts:
  - Co-movement of Emerging South with North has weakened over time (divergence across groups).
  - Co-movement within North and within Emerging South has strengthened (convergence within groups).
  - Emerging South’s growth dynamics have become more closely tied to their intra-group trading partners.

### IV. Quantifying growth spillovers — benchmark panel regressions
- Regression framework:
  - Panel OLS with dependent variable yi,t = 5-year average growth rate (GDP, industry, services, agriculture) for country i; nine 5-year panels over 1960–2005.
  - Key regressors: N i,t (trade-weighted Northern index 5-year average), ES i,t (trade-weighted Emerging Southern index 5-year average).
  - Time variation captured via interaction with Dpre-globalization (dummy = 1 for 1960–1985, 0 for post-1985).
  - Control variables X i,t: log initial per capita GDP (PPP), average population growth, investment share in GDP, government spending share of GDP, human capital (fraction over 15 with secondary attainment), log average inflation.
  - Trade-weighted indices used because they are country-specific and capture bilateral trade intensities.
- Key benchmark GDP growth spillover estimates (globalization period unless specified):
  - World (whole sample):
    - A one percentage point increase in growth of the North index → approximately 0.6 percentage points increase in GDP growth of the rest of the world.
    - A one percentage point increase in growth of the Emerging South index → roughly 0.2 percentage points increase in GDP growth of the rest of the world.
  - North internal spillovers:
    - A one percentage point increase in Northern GDP growth → 0.75 percentage points increase in average GDP growth of a typical North economy during the globalization period.
    - This 0.75 percentage points impact is about 0.54 percentage points higher than in the pre-globalization period (implying the pre-globalization impact ≈ 0.21 percentage points).
  - Emerging South internal spillovers:
    - A one percentage point increase in Emerging South growth → 0.35 percentage points increase in GDP growth of Emerging South economies (globalization period).
  - Cross-group spillovers:
    - Northern impact on Emerging South:
      - A one percentage point increase in Northern GDP growth → 0.34 percentage points increase in Emerging South GDP growth during the globalization period.
      - This 0.34 percentage points is 0.41 percentage points lower than the pre-globalization effect (implying pre-globalization Northern impact on Emerging South ≈ 0.75 percentage points).
    - Northern impact on Developing South:
      - A one percentage point increase in Northern GDP growth → 0.45 percentage points increase in Developing Southern GDP growth (impact stable over time).
- Sectoral spillovers (summary):
  - Industrial output:
    - A one percentage point increase in Northern industrial growth → approximately 0.6 percentage points rise in industrial growth of the rest of the world (globalization period).
    - A one percentage point increase in Emerging Southern industrial growth → 0.16 percentage points expansion in industrial growth of the rest of the world (globalization period).
  - Services:
    - Service output in the North has a significant impact on the rest of the world (specific coefficients reported in detailed regression tables).
  - No significant temporal change noted in the extent of industrial growth spillovers from North and Emerging South to the rest of the world in aggregate.
- Interpretation and implications from regression findings:
  - North economies continue to play a major role in explaining global growth dynamics, but their impact on Emerging South has declined in the globalization period relative to earlier periods.
  - Both North and Emerging South exhibit stronger intra-group spillovers over time (particularly pronounced for North; suggestive evidence for Emerging South).
  - Developing South remains significantly affected by Northern growth throughout the full sample period.
  - Sectoral structure changes (manufacturing rise in Emerging South) and rising intra-industry and intraregional trade explain increasing interdependence between North and Emerging South.

### V. Economic and theoretical implications
- Structural change in interaction pattern:
  - Traditional unidirectional North→South dependence (standard North-South model) is increasingly less applicable for Emerging South.
  - The relationship between North and Emerging South has shifted toward multifaceted interdependence driven by:
    - Rising economic weight of Emerging South (contribution to global GDP growth increased).
    - Shift from commodity exports to manufacturing and intra-industry trade.
    - Stronger South-South trade and financial linkages.
    - Changing composition of capital flows (more FDI and portfolio equity; less debt).
- Contribution to global growth:
  - During Bretton Woods period, North and Emerging South accounted for 74 percent and 22 percent of world GDP growth, respectively.
  - In the globalization period, Emerging South contribution to global GDP growth rose to 52 percent, exceeding Northern contribution of 45 percent.
- Policy and modeling implications (derived from empirical results):
  - Macroeconomic policy design and international coordination should account for increased intra-group spillovers in the North and Emerging South and rising interdependence between these groups.
  - Theoretical models of international transmission should incorporate sectoral shifts, intra-industry trade, and changing composition of financial flows to replicate observed growth spillovers.

*Source: _wp07280 - 7. Growth Impact of the Emerging South (chapter content provided).*

### Appendix IIB.

### Appendix IIB.

### Sectoral growth dynamics and intra-/cross-group spillovers
- Intra-group growth spillovers have increased for the North and Emerging South:
  - "A one percentage point increase in the growth of industrial output in the North corresponds to slightly more than 0.6 percentage points increase in the growth of industrial output in the North economies."
  - "This impact is about 0.35 percentage points higher during the globalization period although the change over the two periods is not significant."
  - "A one percentage point increase in the industrial output of the Emerging South group is associated with 0.20 percentage points increase in the industrial output growth of the Emerging South economies," and "this impact has not changed over time."
- Services sector:
  - Intra-group services spillovers follow a similar pattern to industry, with "a statistically significant increase in the magnitude of growth spillovers from the Northern services to individual countries in the North across the two periods."
- Agriculture:
  - "There is no noticeable temporal pattern in the extent of growth spillovers in agricultural output."
- Cross-group sectoral spillovers:
  - "A one percentage point increase in the growth of the Northern industrial output is associated with a growth of 0.40 percentage points in the Emerging South economies and this impact is two times higher in the pre-globalization period."
  - "A one percentage point increase in the growth of the Northern services affects the Emerging South services growth by an additional 0.6 percentage points in the pre-globalization period in comparison to the insignificant impact during the globalization."
  - "The Developing Southern sectoral growth appears to be heavily affected by the Northern growth over both periods."
- Section summary (three major results):
  - Intra-group growth spillovers have become stronger as countries in the North and Emerging South have become more interdependent.
  - There has been a decline in cross-group growth spillovers as the impact of the North on the Emerging South has decreased over time; Emerging South countries have become more independent from Northern growth dynamics in the globalization period, in contrast to the Developing South.
  - "The North still plays an important role in explaining the global economic growth."

### Robustness exercises and outlier checks
- Robustness strategy:
  - Controlled for additional variables: export structure, trade openness, financial openness, and common shocks.
  - Examined regional manifestations of spillovers (Asia and Pacific, Latin America and the Caribbean).
- Outlier treatment methods:
  - Iteratively re-weighted least squares (robust regressions).
  - Excluding observations "that are two standard deviations above or below the mean growth rate of the samples."
  - Both methods "lead to broadly similar coefficient estimates with those of the benchmark regressions."
- Key robustness findings:
  - Inclusion of additional controls "does not affect our qualitative findings, but they lead to some minor changes in the magnitudes of some coefficients of interest."
  - "The impact of the Northern GDP and sectoral growth on the average growth of the North economies has increased in the globalization period while the Emerging South has become less dependent on the growth spillovers from the Northern activity in the globalization period."
  - "The impact of the Emerging Southern GDP and sectoral growth on the growth of countries in this group is significant during the globalization period and the estimates are broadly consistent with the benchmark results."

### Controlling for export structure, openness, and common shocks (detailed controls)
- Additional variables included:
  - "The share of manufacturing exports as a proxy for the high value-added component of the export structure."
  - "The extent of trade openness, measured by the fraction of years the country has an open trading regime using Sachs and Warner (1995) de-jure trade liberalization dummy."
  - "The degree of financial openness, measured by the share of the stock of FDI and portfolio-equity liabilities in GDP."
  - "Common shocks proxied by the changes in oil prices."
- Effects of controls:
  - "Manufacturing exports have a significant impact on GDP and sectoral growth of the whole sample and the Emerging South GDP."
  - "Trade openness has a positive impact on the GDP, industry and services growth of the Developing South group, and the GDP and services growth of the North group."
  - "Financial openness has a positive impact on the North. In contrast, the impact on the Emerging South is either statistically insignificant for the growth rates of GDP and services or negative for the industry growth."
  - "Oil price changes positively affect the Developing South growth."

### Growth spillovers across geographical regions (AP and LAC)
- Asia and Pacific (AP) region:
  - "The impact of the North GDP, industry and services growth on the respective aggregates of the AP region has clearly declined during the globalization period whereas the Emerging Southern trading partners’ effect has been significant and strengthened over time."
  - "While the impact of the Northern GDP (industrial output) growth on the AP region is significant during the pre-globalization period, it has become insignificant over the period of globalization."
  - "A one percentage point increase in the Emerging Southern GDP growth is associated with 0.35 points increase on the growth of the AP region during the globalization period and this impact is 0.27 points higher relative to the pre-globalization period."
- Latin America and the Caribbean (LAC) region:
  - "The impact of Northern GDP and sectoral growth on the LAC region is significant during the globalization period but there is no clear indication that the extent of spillovers has strengthened over time."
  - "The Emerging Southern industrial output growth has a significant growth impact on the LAC industrial production during the globalization period."
- Note: "These two regions include countries from both the Emerging and Developing South groups."

### Implications for the decoupling debate
- Main empirical implication:
  - "The impact of the North on the Emerging South countries has been declining over the past two decades implying that there is some partial support for the decoupling of business cycles of this group from the advanced countries in the North."
  - "These results are also valid for the AP region."
- Caveats and limitations:
  - Results apply to "a large group of advanced countries in the North, not just the United States."
  - Findings are "suggestive of some changes in the evolution of annual growth fluctuations" and "do not account for potential non-linearities and general equilibrium considerations."
  - Reference to Helbling and others (2007): spillovers may be larger during full-blown U.S. recessions than during mid-cycle slowdowns; "U.S. recessions are more worrisome for the rest of the world since U.S. import growth turns sharply negative during recessions, and cross-country asset price correlations increase significantly during financial market downturns."

### Conclusion: substantive findings and policy implications
- Main empirical findings:
  - "The South is no longer a homogenous group of developing countries."
  - Emerging South countries "have diversified their economies, attained high growth rates and increasingly become important players in the global economy."
  - "The nature of economic interactions between the North and Emerging South has evolved from one of dependence to multidimensional interdependence."
  - "Cross-country correlations of growth fluctuations in aggregate output within each group of the North and Emerging South countries have increased over time implying that there has been a noticeable pattern of intra-group convergence of growth spillovers."
  - "Cross-group correlations of growth fluctuations suggest that the Emerging South economic activity has appeared to decouple from that of the North over time, [but] there has been no significant change in the nature of growth linkages between the North and Developing South."
  - Panel regression results (controlling for standard growth determinants, export structure, trade and financial openness, and oil price changes) confirm: "the impact of the North on the growth dynamics of the Emerging South has declined in the globalization period (1986–2005) relative to the earlier periods" and "both the North and Emerging South economies have started to exhibit more intensive intra-group growth spillovers."
  - "The Developing South countries have continued to be significantly affected by the Northern growth throughout the entire sample."
  - Regional confirmation: "the impact of the North on [Asia and Pacific] has declined over time, [but] it has not changed much on [Latin America and the Caribbean]." "The impact of the Emerging South on Asia and Pacific appears to have increased during the globalization period."
- Policy implications:
  - "The changing nature of international linkages implies that the global macroeconomic environment can have significant effects on domestic conditions that should be taken into account in the formulation of policies."
  - "Nationally oriented policies aimed at economic stabilization would have a limited impact if growth dynamics in small open economies are driven primarily by external factors such as trade partner’s growth and capital flows."
  - Under such circumstances, economic policy should "focus on domestic macroeconomic fundamentals, efficient functioning of markets and of institutions to mitigate the potentially adverse effects of external shocks."
  - On international policy coordination:
    - Traditional trade-multiplier models imply "a growing need for international policy coordination" when goods and assets markets are highly integrated (Oudiz and Sachs, 1984).
    - Obstfeld and Rogoff (2001) suggest that increased integration "may in fact diminish the need for monetary policy coordination" because international financial markets expand opportunities for cross-country risk sharing; policymakers should "focus on eliminating the distortions created by various rigidities in domestic markets."
    - Coordination "serves little purpose in response to global shocks since it is not possible for countries to insure each other against such shocks."
- Theoretical implications:
  - "It is a major challenge for the traditional North-South models to explain some of the stylized facts documented here."
  - The classical North-South model's assumption of asymmetry (North drives South) may no longer be relevant, especially for the Emerging South.
  - Recent modeling efforts "attempt to account for some of the observations we document here, but they fall short of explaining various features associated with the evolving nature of North-South linkages."

*Source: _wp07280 - Appendix IIB.*

### References

### _wp07280 - References

### Key empirical statistics (group size and growth)
- Size distribution of groups (in percent), period averages:
  - North: 1960-1972 = 73.40; 1973-1985 = 70.25; 1986-2005 = 62.38
  - Emerging South: 1960-1972 = 22.03; 1973-1985 = 25.41; 1986-2005 = 33.74
  - Developing South: 1960-1972 = 4.57; 1973-1985 = 4.34; 1986-2005 = 3.88
- Average growth rates of macroeconomic and sectoral aggregates (in percent), period averages:
  - North GDP: 1960-1972 = 4.89; 1973-1985 = 2.82; 1986-2005 = 2.63
  - Emerging South GDP: 1960-1972 = 5.15; 1973-1985 = 5.00; 1986-2005 = 5.63
  - Developing South GDP: 1960-1972 = 4.11; 1973-1985 = 3.14; 1986-2005 = 3.24
  - (Sectoral details available in Table 2: Agriculture, Industry, Services, Exports for each group and period)

### Sectoral composition changes (value-added shares, in percent)
- World (period averages):
  - Agriculture: 1960-1972 = 5.67; 1973-1985 = 4.41; 1986-2005 = 3.91
  - Industry: 1960-1972 = 32.98; 1973-1985 = 31.86; 1986-2005 = 29.59
  - Services: 1960-1972 = 61.39; 1973-1985 = 63.73; 1986-2005 = 66.51
- North:
  - Agriculture: 1960-1972 = 3.50; 1973-1985 = 2.43; 1986-2005 = 1.92
  - Industry: 1960-1972 = 33.60; 1973-1985 = 32.11; 1986-2005 = 28.69
  - Services: 1960-1972 = 62.90; 1973-1985 = 65.46; 1986-2005 = 69.39
- Emerging South:
  - Agriculture: 1960-1972 = 21.59; 1973-1985 = 15.72; 1986-2005 = 12.28
  - Industry: 1960-1972 = 27.93; 1973-1985 = 29.74; 1986-2005 = 33.38
  - Services: 1960-1972 = 50.48; 1973-1985 = 54.54; 1986-2005 = 54.34
- Developing South:
  - Agriculture: 1960-1972 = 28.96; 1973-1985 = 20.97; 1986-2005 = 20.09
  - Industry: 1960-1972 = 29.91; 1973-1985 = 33.90; 1986-2005 = 32.13
  - Services: 1960-1972 = 44.61; 1973-1985 = 45.13; 1986-2005 = 47.91

### Changes in composition of trade (merchandise, in percent)
- Exports, North:
  - Primary Non-fuels: 1960-1972 = 24.92; 1973-1985 = 19.48; 1986-2005 = 14.18
  - Primary Fuels: 1960-1972 = 3.79; 1973-1985 = 6.37; 1986-2005 = 4.20
  - Manufacturing: 1960-1972 = 71.37; 1973-1985 = 74.22; 1986-2005 = 81.63
- Exports, Emerging South:
  - Primary Non-fuels: 1960-1972 = 60.80; 1973-1985 = 37.76; 1986-2005 = 17.05
  - Primary Fuels: 1960-1972 = 16.78; 1973-1985 = 23.65; 1986-2005 = 9.00
  - Manufacturing: 1960-1972 = 23.33; 1973-1985 = 38.59; 1986-2005 = 73.95
- Exports, Developing South:
  - Primary Non-fuels: 1960-1972 = 81.53; 1973-1985 = 35.64; 1986-2005 = 33.36
  - Primary Fuels: 1960-1972 = 14.96; 1973-1985 = 56.80; 1986-2005 = 40.77
  - Manufacturing: 1960-1972 = 7.33; 1973-1985 = 9.43; 1986-2005 = 28.21
- Imports, North:
  - Primary Non-fuels: 1960-1972 = 35.74; 1973-1985 = 22.21; 1986-2005 = 15.39
  - Primary Fuels: 1960-1972 = 11.59; 1973-1985 = 22.69; 1986-2005 = 9.51
  - Manufacturing: 1960-1972 = 52.66; 1973-1985 = 55.11; 1986-2005 = 75.10
- (Notes: primary non-fuels = agricultural raw materials, food, ores, and metals)

### Intra-industry trade intensity (Grubel-Lloyd Index) — selected examples (period averages)
- G-7 countries show rising intra-industry trade intensity over periods; example for USA:
  - USA: 1970-79 = 0.484; 1980-89 = 0.502; 1990-99 = 0.602
- Selected Emerging South country examples:
  - China: 1970-79 = 0.099; 1980-89 = 0.141; 1990-99 = 0.268
  - India: 1970-79 = 0.125; 1980-89 = 0.101; 1990-99 = 0.201
  - Brazil: 1970-79 = 0.172; 1980-89 = 0.217; 1990-99 = 0.275
- (Notes: indices are averages of bilateral Grubel-Lloyd Indices with specified groups)

### Contribution to world GDP growth (in percent)
- Contribution of groups to world growth (period averages):
  - North: 1960-1972 = 74.00; 1973-1985 = 48.86; 1986-2005 = 44.62
  - Emerging South: 1960-1972 = 22.34; 1973-1985 = 46.36; 1986-2005 = 51.84
  - Developing South: 1960-1972 = 3.66; 1973-1985 = 4.77; 1986-2005 = 3.53

### Correlations and synchronization (selected correlation coefficients)
- Cross-group correlations (output weighted indices), selected entries:
  - North–Emerging South GDP correlation: 1960-1972 = 0.23; 1973-1985 = 0.42; 1986-2005 = 0.07
  - North–Developing South GDP correlation: 1960-1972 = 0.32; 1973-1985 = 0.27; 1986-2005 = 0.20
  - Emerging South–Developing South GDP correlation: 1960-1972 = 0.75; 1973-1985 = 0.31; 1986-2005 = 0.18
- Correlations between North and Emerging South (with output weighted Emerging South index):
  - GDP: 1960-1972 = 0.12; 1973-1985 = 0.34; 1986-2005 = -0.07
- Trade-weighted correlations (North, GDP): 1960-1972 = 0.26; 1973-1985 = 0.58; 1986-2005 = 0.53
- Intra-group correlations (Emerging South, output weighted GDP): 1960-1972 = 0.10; 1973-1985 = 0.22; 1986-2005 = 0.39

### Trade and financial integration trends (figures and notes)
- Evolution of trade and financial liberalization (fraction of liberalized countries, in percent) plotted 1960–2005 with:
  - Solid line = Trade Liberalization
  - Dashed line = Financial Liberalization
- Trade openness (Exports+Imports/GDP, in percent) shown 1960–2005 for World, North, Emerging South, Developing South.
- Direction of trade flows (share of trade directed towards each group) presented annually 1960–2004 for World, North, Emerging South, Developing South.
- Financial integration (gross international financial assets and liabilities, trillions of U.S. dollars) shown 1970–2004 for North (scale to 120), Emerging South (scale to 12), Developing South (scale up to 1.0), with components Debt, FDI, Equity, Other.
- Composition of financial assets and liabilities (in percent) shown 1970–2004 for each group; Debt includes official and unofficial debt; "Other" includes financial derivatives and total reserves minus gold.

### Benchmark GDP growth regressions (Table 10 — coefficient estimates and diagnostics)
- Dependent variable: 5-year average of annual real GDP growth. Pooled OLS with heteroscedasticity-consistent robust standard errors. Symbols *, **, *** indicate significance at 10 percent, 5 percent, and 1 percent respectively.
- Selected coefficient estimates (point estimates with significance markers where reported):
  - Northern GDP (coefficient):
    - Whole Sample = 0.589***
    - North = 0.744***
    - Emerging South = 0.344*
    - Developing South = 0.448***
  - Northern GDP * D pre-globalization:
    - Whole Sample = 0.00448
    - North = -0.537**
    - Emerging South = 0.412**
    - Developing South = -0.0845
  - Emerging South GDP (coefficient):
    - Whole Sample = 0.173**
    - North = -0.158
    - Emerging South = 0.355***
    - Developing South = 0.0788
  - Emerging South GDP * D pre-globalization:
    - Whole Sample = 0.0495
    - North = 0.195
    - Emerging South = -0.122
    - Developing South = 0.107
  - log (Initial Percapita GDP):
    - Whole Sample = -0.0495
    - North = -2.288***
    - Emerging South = -1.100**
    - Developing South = 0.182
  - Population Growth:
    - Whole Sample = 0.614***
    - North = 1.020***
    - Emerging South = 0.0635
    - Developing South = 0.700***
  - Investment / GDP:
    - Whole Sample = 0.0818***
    - North = 0.0753**
    - Emerging South = 0.160***
    - Developing South = 0.0622***
  - Government Spending / GDP:
    - Whole Sample = -0.0036
    - North = -0.0192
    - Emerging South = 0.00794
    - Developing South = -0.0196
  - log (100 + Inflation):
    - Whole Sample = -1.736***
    - North = -3.72
    - Emerging South = -1.299***
    - Developing South = -2.204***
  - Secondary Education (15+):
    - Whole Sample = 0.018
    - North = 0.000156
    - Emerging South = 0.0567**
    - Developing South = 0.0169
- Regression diagnostics:
  - Observations: Whole Sample = 803; North = 198; Emerging South = 192; Developing South = 413
  - R-squared: Whole Sample = 0.25; North = 0.56; Emerging South = 0.43; Developing South = 0.21

### Growth impact interpretations from figures (coefficients visualized)
- Figure 6 (Growth Impact of the North): example interpretation provided in notes:
  - "a one percentage point increase in the North GDP growth is associated with a significant increase of 0.74 percentage points in the GDP growth of the North countries during the globalization period and this impact was lower by 0.54 percentage points at 5 percent significance level during the pre-globalization period."
- Figure 7 (Growth Impact of the Emerging South): visualizes benchmark regression coefficients for World, North, Emerging South, Developing South across GDP, Industry, Services, Agriculture (coefficients reproduced in Table 10 and Appendix IIB).

*Source: _wp07280 - References*

### Appendix I. Summary Statistics

### Appendix I. Summary Statistics (Obtained from the Sample Used in the Benchmark GDP Growth Regression)

### Sample summary statistics (Obs Mean Std. Dev. Min Max)
- GDP 80 33.90 2.88 -7.12 18.24
- Industry 75 44.45 5.03 -15.35 40.63
- Services 75 34.16 4.00 -15.93 60.79
- Agriculture 75 72.50 3.35 -10.07 28.16
- Northern GDP 80 33.16 1.13 1.05 7.36
- Emerging South GDP 80 35.36 1.53 -0.82 10.96
- Northern Industry 80 32.66 1.78 0.09 9.75
- Emerging South Industry 80 35.99 2.31 -1.78 15.51
- Northern Services 80 33.32 1.02 0.56 7.39
- Emerging South Services 80 35.58 1.78 0.05 17.08
- Northern Agriculture 80 31.53 1.53 -2.15 7.60
- Emerging South Agriculture 80 32.86 1.36 -6.27 11.71
- log (Initial Percapita GDP) 80 38.30 1.13 5.92 10.46
- Population Growth 80 31.92 1.13 -5.15 8.11
- Investment / GDP 80 320.94 8.46 3.12 73.11
- Government Spending / GDP 80 316.98 8.47 0.94 63.88
- log (100 + Inflation) 80 34.75 0.34 4.57 8.80
- Secondary Education (15+) 80 323.10 17.25 0.00 73.10
- Ave_sachswarner 75 50.56 0.48 0.00 1.00
- FDI-Portfolio Inflows 63 122.42 34.14 0.000 3440.98
- Manufacturing Exports 70 739.28 30.67 0.27 96.27
- Oil Price 80 313.05 21.32 -5.28 63.80

*Notes: The dependent variables in regressions reported below are 5-year averages of growth rates where specified.*

---

### Appendix IIA. Coefficient Estimates of the Benchmark GDP Growth Regressions (Using Output-Weighted Indices)

### Benchmark 1 (first reported panel)
- Whole Sample (1)
  - Northern GDP 0.645*** [0.14]
  - Northern GDP * D pre-globalization 0.137 [0.17]
  - Emerging South GDP 0.512*** [0.12]
  - Emerging South GDP * D pre-globalization -0.0261 [0.11]
  - Observations 803
  - R-squared 0.25
- North (2)
  - Northern GDP 0.842*** [0.21]
  - Northern GDP * D pre-globalization -0.466* [0.23]
  - Emerging South GDP -0.0204 [0.11]
  - Emerging South GDP * D pre-globalization 0.151 [0.14]
  - Observations 198
  - R-squared 0.57
- Emerging South (3)
  - Northern GDP 0.430 [0.28]
  - Northern GDP * D pre-globalization 0.601 [0.43]
  - Emerging South GDP 0.992*** [0.23]
  - Emerging South GDP * D pre-globalization -0.162 [0.25]
  - Observations 192
  - R-squared 0.44
- Developing South (4)
  - Northern GDP 0.611*** [0.21]
  - Northern GDP * D pre-globalization 0.0521 [0.27]
  - Emerging South GDP 0.598*** [0.19]
  - Emerging South GDP * D pre-globalization 0.00918 [0.19]
  - Observations 413
  - R-squared 0.23

### Benchmark 2 (alternative weighting / adjustment)
- Whole Sample (1)
  - Northern GDP 0.699*** [0.14]
  - Northern GDP * D pre-globalization -0.00226 [0.17]
  - Emerging South GDP 0.614*** [0.12]
  - Emerging South GDP * D pre-globalization 0.07230 [0.11]
  - Observations 803
  - R-squared 0.26
- North (2)
  - Northern GDP 0.681** [0.25]
  - Northern GDP * D pre-globalization -0.583** [0.26]
  - Emerging South GDP -0.0812 [0.11]
  - Emerging South GDP * D pre-globalization 0.241 [0.14]
  - Observations 198
  - R-squared 0.55
- Emerging South (3)
  - Northern GDP 0.406 [0.27]
  - Northern GDP * D pre-globalization 0.539 [0.46]
  - Emerging South GDP 0.974*** [0.22]
  - Emerging South GDP * D pre-globalization -0.140 [0.25]
  - Observations 192
  - R-squared 0.45
- Developing South (4)
  - Northern GDP 0.611*** [0.21]
  - Northern GDP * D pre-globalization 0.0521 [0.27]
  - Emerging South GDP 0.598*** [0.19]
  - Emerging South GDP * D pre-globalization 0.00918 [0.19]
  - Observations 413
  - R-squared 0.23

*Notes: Dependent variable is 5-year average of real GDP growth. Heteroscedasticity consistent robust standard errors reported in parenthesis. *, **, *** indicate significance at 10 percent, 5 percent, and 1 percent levels respectively.*

---

### Appendix IIB. Coefficient Estimates of the Benchmark Sectoral Growth Regressions

### Industry (5-year averages of industry value-added growth)
- Whole Sample (1)
  - Northern Industry 0.572*** [0.16]
  - Northern Industry * D pre-globalization 0.199 [0.2]
  - Emerging South Industry 0.160* [0.09]
  - Emerging South Industry * D pre-globalization 0.0848 [0.094]
  - Observations 754
  - R-squared 0.25
- North (2)
  - Northern Industry 0.627** [0.24]
  - Northern Industry * D pre-globalization -0.346 [0.24]
  - Emerging South Industry -0.024 [0.11]
  - Emerging South Industry * D pre-globalization 0.0684 [0.081]
  - Observations 191
  - R-squared 0.53
- Emerging South (3)
  - Northern Industry 0.404 [0.24]
  - Northern Industry * D pre-globalization 0.416 [0.29]
  - Emerging South Industry 0.204 [0.14]
  - Emerging South Industry * D pre-globalization -0.0244 [0.11]
  - Observations 184
  - R-squared 0.42
- Developing South (4)
  - Northern Industry 0.490* [0.27]
  - Northern Industry * D pre-globalization 0.165 [0.35]
  - Emerging South Industry 0.075 [0.13]
  - Emerging South Industry * D pre-globalization 0.149 [0.17]
  - Observations 379
  - R-squared 0.21

### Services (5-year averages of services value-added growth)
- Whole Sample (1)
  - Northern Services 0.542*** [0.13]
  - Northern Services * D pre-globalization 0.195 [0.18]
  - Emerging South Services 0.0833 [0.095]
  - Emerging South Services * D pre-globalization 0.01840 [0.098]
  - Observations 753
  - R-squared 0.17
- North (2)
  - Northern Services 0.651*** [0.18]
  - Northern Services * D pre-globalization -0.413* [0.23]
  - Emerging South Services -0.247* [0.13]
  - Emerging South Services * D pre-globalization 0.132 [0.099]
  - Observations 191
  - R-squared 0.56
- Emerging South (3)
  - Northern Services 0.118 [0.18]
  - Northern Services * D pre-globalization 0.568** [0.2]
  - Emerging South Services 0.329** [0.16]
  - Emerging South Services * D pre-globalization -0.167 [0.12]
  - Observations 184
  - R-squared 0.37
- Developing South (4)
  - Northern Services 0.426* [0.23]
  - Northern Services * D pre-globalization 0.0798 [0.28]
  - Emerging South Services -0.0251 [0.13]
  - Emerging South Services * D pre-globalization 0.138 [0.16]
  - Observations 378
  - R-squared 0.15

### Agriculture (5-year averages of agriculture value-added growth)
- Whole Sample (1)
  - Northern Agriculture 0.03820 [0.075]
  - Northern Agriculture * D pre-globalization -0.321** [0.13]
  - Emerging South Agriculture 0.164 [0.14]
  - Emerging South Agriculture * D pre-globalization 0.122 [0.1]
  - Observations 757
  - R-squared 0.09
- North (2)
  - Northern Agriculture 0.07030 [0.12]
  - Northern Agriculture * D pre-globalization 0.0276 [0.28]
  - Emerging South Agriculture 0.276 [0.39]
  - Emerging South Agriculture * D pre-globalization -0.0287 [0.27]
  - Observations 191
  - R-squared 0.10
- Emerging South (3)
  - Northern Agriculture 0.07090 [0.1]
  - Northern Agriculture * D pre-globalization -0.101 [0.2]
  - Emerging South Agriculture -0.342 [0.41]
  - Emerging South Agriculture * D pre-globalization 0.309 [0.22]
  - Observations 184
  - R-squared 0.10
- Developing South (4)
  - Northern Agriculture 0.0197 [0.13]
  - Northern Agriculture * D pre-globalization -0.517*** [0.18]
  - Emerging South Agriculture 0.269 [0.16]
  - Emerging South Agriculture * D pre-globalization 0.0332 [0.15]
  - Observations 382
  - R-squared 0.10

*Notes: Dependent variables are 5-year averages of annual industry, services and agriculture value-added growth at constant local currency. Heteroscedasticity consistent robust standard errors reported in parenthesis. *, **, *** indicate significance at 10 percent, 5 percent, and 1 percent levels respectively.*

---

### Appendix III. Coefficient Estimates of the Full Model for the GDP Growth Regressions

### Selected coefficients (Full model columns as reported)
- Northern GDP
  - (1) Whole Sample 0.654*** [0.11]
  - (2) North 0.701*** [0.19]
  - (3) Emerging South 0.325** [0.15]
  - (4) Developing South 0.539*** [0.17]
  - (5) Whole Sample 0.610*** [0.11]
  - (6) North 0.818*** [-0.19]
  - (7) Emerging South 0.3 [0.21]
  - (8) Developing South 0.291* [0.17]
- Northern GDP * D pre-globalization
  - (1) 0.0539 [0.15]
  - (2) -0.658* [0.34]
  - (3) 0.498** [0.23]
  - (4) -0.157 [0.22]
  - (5) -0.0517 [0.19]
  - (6) -0.609** [-0.27]
  - (7) 0.642** [0.28]
  - (8) -0.339 [0.25]
- Emerging South GDP
  - (1) 0.199*** [0.067]
  - (2) -0.223** [0.097]
  - (3) 0.297** [0.12]
  - (4) 0.149 [0.11]
  - (5) 0.237*** [0.08]
  - (6) -0.109 [-0.097]
  - (7) 0.341** [0.12]
  - (8) 0.194* [0.11]
- Emerging South GDP * D pre-globalization
  - (1) 0.0413 [0.1]
  - (2) 0.282 [0.19]
  - (3) -0.122 [0.16]
  - (4) 0.112 [0.17]
  - (5) 0.027 [0.12]
  - (6) 0.286* [0.16]
  - (7) -0.238 [0.17]
  - (8) 0.077 [0.19]
- Ave_sachswarner
  - (5) 1.506*** [0.38]
  - (6) 1.428*** [0.48]
  - (7) 0.583 [0.63]
  - (8) 1.664*** [0.4]
- FDI-Portfolio Inflows
  - (5) 0.00239 [0.0037]
  - (6) 0.00876** [0.0032]
  - (7) -0.00674 [0.0047]
  - (8) 0.00792 [0.013]
- Manufacturing Exports
  - (1) 0.0151** [0.0058]
  - (2) 0.000739 [0.0093]
  - (3) 0.0158* [0.0085]
  - (4) 0.00301 [0.0088]
  - (5) 0.0146** [0.0061]
  - (6) 0.00381 [0.009]
  - (7) 0.0142 [0.0094]
  - (8) 0.000584 [0.01]
- Oil Price
  - (1) 0.00978** [0.0047]
  - (2) 0.00403 [0.0071]
  - (3) 0.00659 [0.0099]
  - (4) 0.0218*** [0.0069]
  - (5) 0.0122** [0.0049]
  - (6) -0.00281 [-0.0065]
  - (7) 0.00963 [0.01]
  - (8) 0.0274*** [0.0073]

- Observations:
  - (1) 679, (2) 192, (3) 187, (4) 300, (5) 589, (6) 171, (7) 163, (8) 255
- R-squared:
  - (1) 0.3, (2) 0.62, (3) 0.45, (4) 0.25, (5) 0.27, (6) 0.5, (7) 0.46, (8) 0.26

*Notes: Dependent variable is 5-year average of real GDP growth. Heteroscedasticity consistent robust standard errors reported in parenthesis. Coefficient estimates from standard growth variables not reported here but available from the authors upon request. *, **, *** indicate statistical significance at the 10 percent, 5 percent, and 1 percent levels respectively.*

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### Appendix IVA. Regional Extensions of the Benchmark and Full Regression Models (GDP and Industry Growth)

### Asia-Pacific and Latin America and the Caribbean — GDP (selected coefficients)
- Northern GDP
  - Asia-Pacific (1) 0.366 [0.23]
  - Asia-Pacific (2) 0.505** [0.23]
  - Asia-Pacific (3) 0.420 [0.29]
  - Latin America and the Caribbean (1) 0.516** [0.23]
  - Latin America and the Caribbean (2) 0.657** [0.23]
  - Latin America and the Caribbean (3) 0.393* [0.22]
- Northern GDP * D pre-globalization
  - Asia-Pacific (1) 0.643** [0.22]
  - Asia-Pacific (2) 0.590** [0.23]
  - Asia-Pacific (3) 0.822** [0.32]
  - Latin America and the Caribbean (1) -0.507* [0.29]
  - Latin America and the Caribbean (2) -0.16 [0.46]
  - Latin America and the Caribbean (3) -0.354 [0.48]
- Emerging South GDP
  - Asia-Pacific (1) 0.347* [0.18]
  - Asia-Pacific (2) 0.432** [0.19]
  - Asia-Pacific (3) 0.445** [0.18]
  - Latin America and the Caribbean (1) 0.330 [0.24]
  - Latin America and the Caribbean (2) 0.356 [0.26]
  - Latin America and the Caribbean (3) 0.378 [0.26]
- Emerging South GDP * D pre-globalization
  - Asia-Pacific (1) -0.270* [0.14]
  - Asia-Pacific (2) -0.199 [0.15]
  - Asia-Pacific (3) -0.314 [0.19]
  - Latin America and the Caribbean (1) 0.410 [0.28]
  - Latin America and the Caribbean (2) 0.144 [0.47]
  - Latin America and the Caribbean (3) 0.135 [0.46]
- Additional covariates reported in some columns:
  - Ave_sachswarner 1.257 [0.83], 1.563** [0.68]
  - FDI-Portfolio Inflows -0.00523 [0.01], 0.00254 [0.019]
  - Manufacturing Exports 0.0170** [0.0078], 0.016 [0.0096], -0.0116 [0.011]
  - Oil Price 0.00501 [0.012], 0.00535 [0.015], 0.0187 [0.015], 0.0182 [0.016]
- Observations and R-squared:
  - Asia-Pacific GDP: Observations 123, 113, 103; R-squared 0.36, 0.38, 0.34
  - Latin America and the Caribbean GDP: Observations 206, 180, 155; R-squared 0.34, 0.42, 0.36

### Asia-Pacific and Latin America and the Caribbean — Industry (selected coefficients)
- Northern Industry
  - Asia-Pacific (1) 0.345 [0.39]
  - Asia-Pacific (2) 0.601 [0.46]
  - Asia-Pacific (3) 0.366 [0.39]
  - Latin America and the Caribbean (1) 0.382 [0.35]
  - Latin America and the Caribbean (2) 0.654* [0.37]
  - Latin America and the Caribbean (3) 0.427 [0.4]
- Northern Industry * D pre-globalization
  - Asia-Pacific (1) 0.840* [0.46]
  - Asia-Pacific (2) 0.608 [0.49]
  - Asia-Pacific (3) 1.113** [0.5]
  - Latin America and the Caribbean (1) -0.341 [0.46]
  - Latin America and the Caribbean (2) -0.187 [0.46]
  - Latin America and the Caribbean (3) -0.288 [0.6]
- Emerging South Industry
  - Asia-Pacific (1) 0.315 [0.21]
  - Asia-Pacific (2) 0.434** [0.18]
  - Asia-Pacific (3) 0.503*** [0.16]
  - Latin America and the Caribbean (1) 0.473** [0.23]
  - Latin America and the Caribbean (2) 0.500** [0.19]
  - Latin America and the Caribbean (3) 0.520** [0.22]
- Emerging South Industry * D pre-globalization
  - Asia-Pacific (1) -0.184 [0.15]
  - Asia-Pacific (2) -0.0474 [0.22]
  - Asia-Pacific (3) -0.222 [0.2]
  - Latin America and the Caribbean (1) 0.268 [0.3]
  - Latin America and the Caribbean (2) 0.215 [0.34]
  - Latin America and the Caribbean (3) 0.0985 [0.36]
- Additional covariates reported in some columns:
  - Ave_sachswarner 1.721 [1.32], 2.012** [0.93]
  - FDI-Portfolio Inflows -0.023 [0.013], 0.00957 [0.034]
  - Manufacturing Exports 0.0306 [0.024], 0.031 [0.021], 0.00763 [0.021], -0.0132 [0.027]
  - Oil Price 0.00636 [0.024], 0.0113 [0.027], 0.0418** [0.016], 0.0321 [0.021]
- Observations and R-squared:
  - Asia-Pacific Industry: Observations 115, 109, 102; R-squared 0.25, 0.28, 0.32
  - Latin America and the Caribbean Industry: Observations 204, 180, 155; R-squared 0.28, 0.39, 0.3

*Notes: Dependent variables are 5-year averages of real GDP and industry value-added growth. Columns 2 and 3 include full growth model covariates including de-jure trade openness, FDI-Portfolio liabilities to GDP ratio and oil price change.*

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### Appendix IVB. Figures — Growth Impact (selected coefficient values taken from Appendix IVA)

### Growth Impact of the North (Benchmark regressions)
- GDP (Asia-Pacific / Latin America and the Caribbean)
  - Asia-Pacific 0.643**
  - Asia-Pacific 0.366
  - Latin America and the Caribbean 0.516**
  - Latin America and the Caribbean -0.507*
- Industry
  - Asia-Pacific 0.345
  - Asia-Pacific 0.84*
  - Latin America and the Caribbean 0.382
  - Latin America and the Caribbean -0.341
- Services
  - Asia-Pacific 0.0714
  - Asia-Pacific 0.953***
  - Latin America and the Caribbean 0.649**
  - Latin America and the Caribbean -0.166
- Agriculture
  - Asia-Pacific 0.0709
  - Asia-Pacific 0.0171
  - Latin America and the Caribbean -0.0115
  - Latin America and the Caribbean -0.197

### Growth Impact of the Emerging South (Benchmark regressions)
- GDP (Asia-Pacific / Latin America and the Caribbean)
  - Asia-Pacific 0.347*
  - Asia-Pacific -0.27*
  - Latin America and the Caribbean 0.33
  - Latin America and the Caribbean 0.41
- Industry
  - Asia-Pacific 0.315
  - Asia-Pacific -0.184
  - Latin America and the Caribbean 0.473**
  - Latin America and the Caribbean 0.268
- Services
  - Asia-Pacific 0.351
  - Asia-Pacific -0.338**
  - Latin America and the Caribbean 0.171
  - Latin America and the Caribbean 0.181
- Agriculture
  - Asia-Pacific -0.231
  - Asia-Pacific 0.306
  - Latin America and the Caribbean 0.764**
  - Latin America and the Caribbean -0.329

*Notes: Figures report benchmark pooled OLS coefficient estimates showing globalization and pre-globalization effects of North and Emerging South GDP growth on Asia-Pacific and Latin America and the Caribbean regions.*

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### Appendix V. List of Countries

- North (23)
  - East Asia and Pacific: Australia, Japan, New Zealand
  - North America: Canada, United States
  - Europe: Austria, Belgium, Switzerland, Denmark, Spain, Finland, France, United Kingdom, Germany, Greece, Ireland, Iceland, Italy, Luxembourg*, Netherlands, Norway, Portugal, Sweden

- Emerging South (23)
  - Latin America and the Caribbean: Argentina, Brazil, Chile, Colombia, Mexico, Peru, Venezuela.
  - South Asia, East Asia and the Pacific: China, Hong Kong SAR, India, Indonesia, Korea, Malaysia, Pakistan, Philippines, Singapore, Thailand
  - Europe: Turkey
  - Middle East and North Africa: Egypt, Israel, Jordan, Morocco*
  - Sub-Saharan Africa: South Africa

- Developing South (60)
  - Middle East and North Africa: Algeria, Tunisia, Syrian Arab Republic
  - South Asia, East Asia and the Pacific: Bangladesh, Nepal, Sri Lanka, Papua New Guinea
  - Latin America and the Caribbean: Barbados, Bolivia, Ecuador, El Salvador, Guatemala, Paraguay, Costa Rica, Dominican Republic, Guyana, Haiti, Honduras, Jamaica, Nicaragua, Panama, Trinidad and Tobago**, Uruguay
  - Sub-Saharan Africa: Benin, Botswana, Burkina Faso*, Burundi*, Cameroon, Cape Verde*, Central African Republic, Chad*, Comoros*, Congo, Dem. Rep., Congo, Rep., Cote d’Ivoire*, Equatorial Guinea*, Ethiopia*, Gabon*, Gambia, Ghana, Guinea*, Guinea-Bissau, Kenya, Lesotho, Madagascar*, Malawi, Mali, Mauritania, Mauritius, Mozambique, Niger, Nigeria*, Rwanda, Senegal, Seychelles**, Tanzania, Togo, Uganda, Zambia, Zimbabwe.

*Notes: * and ** indicate countries not included in the benchmark and the full model regressions due to incomplete data.*

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### Appendix VI. Data Sources and Descriptions (selected items and exact formulations)

- GDP: constant 2000 US $, constant PPP 2000 International $, constant local currency unit, PPP-per capita GDP
  - Sources: World Development Indicators, World Economic Outlook, Penn World Tables 6.1, 1960–2005.
  - Variable label: “log (Initial Percapita GDP)”
- Gross Fixed Capital Formation (Investment): constant 2000 USD, constant local currency unit
  - Variable label: “Investment / GDP”
  - Sources: World Development Indicators, World Economic Outlook (WEO), Penn World Tables 6.1, 1960–2005
- General Government Final Consumption Expenditure (Government Spending): constant 2000 USD, constant local currency unit
  - Variable label: “Government Spending / GDP”
  - Sources: World Development Indicators, World Economic Outlook (WEO), Penn World Tables 6.1, United Nations, 1960–2005
- Trade Openness (Exports+Imports) / GDP
  - Sources: World Development Indicators, World Economic Outlook (WEO), United Nations, 1960–2005
  - Authors’ calculation using ratio of constant 2000 USD sum of exports and imports of goods and services over constant 2000 USD GDP.
- Agriculture, Industry, Services value added: constant 2000 USD, constant local currency unit
  - Sources: World Development Indicators, UN Yearbook of National Account Statistics, National Accounts Statistics of OECD, 1960–2005
- Bilateral Exports/Imports, Total Exports/Imports: IMF Direction of Trade Statistics, 1960–2005
- Inflation (CPI): World Economic Outlook, 1960–2005
  - For panel estimation: log (100+ 5 year average of % Inflation) used.
- Oil Price: Average 3 spot price index of crude oil, IMF International Financial Statistics, 1960–2005
  - For panel estimation: 5 year averages of % oil price changes used.
- Population Growth: World Development Indicators, 1960–2005
- Human Capital – Education: “Secondary Education (15+)”
  - Source: Robert J. Barro and Jong Wha Lee (2000) “International Data on Education Attainment”
  - Measure: total percentage of the total population aged 15 and over with the secondary school attainment. For panel estimation 5 year averages used.
- Primary and manufactured exports/imports: World Development Indicators, 1960–2004 (as % of merchandise exports and imports)
- Dates of official financial liberalization: Bekaert, Geert, Campbell R. Harvey and Christian Lundblad, 2005 (Journal of Financial Economics, Vol. 77 (July), pp. 3–55)
- Financial Stocks Series (“FDI-Portfolio Inflows/GDP”): Lane, Philip R. and Milesi-Ferretti, Gian Maria (March 2006) "The External Wealth of Nations: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970–2004" IMF Working Paper No. 06/69 — data annual and reported in millions of current U.S. dollars, 1970–2004.
- Bilateral Intra-Industry Trade Intensity: Period average of the Grubel-Lloyd Index constructed using bilateral annual exports and imports of product k between country i and country j for 81 industries using four-digit (ISIC) classification.
  - Source: Trade and Production Database by Nicita and Olarreaga (2006). Data available for 1976–2004 (an earlier version 1976–99 used in this paper).
- Sachs-Warner Trade Liberalization Measure (“Ave_sachswarner”): Sachs and Warner (1995) dummy updated for 1990–1999 with years of full liberalization by Wacziarg and Welch (2003).

*Italic source attribution: IMF Working Paper appendix (_wp07280 - Appendix I. Summary Statistics).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2007/_wp07280.pdf_