Identifying the Common Component in International Economic Fluctuations: A New Approach
November 1, 1999
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Summary
This paper develops an aggregation procedure using time-varying weights for constructing the common component of international economic fluctuations. The methodology for deriving time-varying weights is based on some stylized features of the data documented in the paper. The model allows for a unified treatment of cyclical and seasonal fluctuations and also captures the dynamic propagation of shocks across countries. Correlations of individual country fluctuations with the common component provide evidence of a “world business cycle” and a distinct European common component. The results suggest that macroeconomic fluctuations have become more closely linked across industrial economies in the post–Bretton Woods period.
Subject: Business cycles, Econometric analysis, Economic growth, Economic sectors, Factor models, Industrial production, Industrial sector, Production, Production growth
Keywords: Autoregressive Conditional Heteroskedasticty, business cycle volatility, Business cycles, country size, country-specific shock, Economic Fluctuations, Factor models, Global, Industrial production, Industrial sector, International and European Business Cycles, IP growth, IP index, Production growth, shock to country, shocks constant, simple average, technology shock, time-varying weight, weighting scheme, WP
Pages:
38
Volume:
1999
DOI:
Issue:
154
Series:
Working Paper No. 1999/154
Stock No:
WPIEA1541999
ISBN:
9781451857214
ISSN:
1018-5941
