Changing Nature of North-South Linkages: Stylized Facts and Explanations

IMF Working Papers, December 1, 2007

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Canonical URL: Changing Nature of North-South Linkages: Stylized Facts and Explanations

Paper examines changing nature of growth spillovers between developed economies (the North) and developing countries (the South) driven by globalization (rising international trade and financial flows).
South is divided into Emerging South and Developing South based on extent of integration into the global economy.
Uses a comprehensive database of macroeconomic and sectoral variables for 106 countries over the period 1960- 2005.
Employs a panel regression framework.
Main stylized facts:
- 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.
- Northern and Emerging Southern economies have started to exhibit more intensive intra-group growth spillovers.

Coverage: 106 countries.
Time span: 1960- 2005.
Empirical approach: panel regression framework using macroeconomic and sectoral variables.
Country grouping: North (developed economies), Emerging South, Developing South (based on extent of integration into the global economy).

Decline in North → Emerging South spillovers during globalization period:
- The impact of Northern economic activity on the Emerging South decreased in 1986-2005 relative to earlier periods.
Stability in North → Developing South spillovers:
- Growth linkages between the North and Developing South remained rather stable over time.
Rise in intra-group spillovers:
- Northern economies and Emerging Southern economies display more intensive intra-group growth spillovers.

Subject: Business cycles, Exports, Globalization, Spillovers, Trade balance
Keywords: Emerging South economy, Emerging South group, globalization period, growth spillover, WP