Volatility and Comovement in a Globalized World Economy: An Empirical Exploration

IMF Working Papers, December 1, 2003

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Volatility and Comovement in a Globalized World Economy: An Empirical Exploration

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Bibliographic details

• Authors: Ayhan Kose, Marco Terrones, Eswar S Prasad
• Published: December 1, 2003
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451875874.001

Summary

• This paper analyzes the evolution of volatility and cross-country comovement in output, consumption, and investment fluctuations using two distinct datasets.
• The results suggest divergent patterns between industrialized countries and emerging market economies in response to globalization and financial integration.

Major empirical findings

• Industrialized countries:
  • There has been a significant decline in the volatility of business cycle fluctuations.
  • There has been a slight increase in the degree of cyclical comovement among industrialized countries over time.
• Emerging market economies:
  • Financial globalization appears to have been associated, on average, with an increase in macroeconomic volatility.
  • Financial globalization appears to have been associated, on average, with declines in the degree of comovement of output growth with their corresponding world aggregates.
  • Financial globalization appears to have been associated, on average, with declines in the degree of comovement of consumption growth with their corresponding world aggregates.

Data and scope

• Two distinct datasets are used to analyze output, consumption, and investment fluctuations (dataset names and specifics are contained in the paper).
• Subject areas covered: Balance of payments, Business cycles, Consumption, Current account, Economic growth, Financial integration, Financial markets, Globalization, National accounts.
• Keywords: business cycle comovement, business cycle fluctuation, Business cycles, Consumption, consumption correlation, consumption risk, correlations, Current account, Financial integration, Global, globalization, globalization period, macroeconomic fluctuations, MFI economy, volatility, WP.

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• Volatility and Comovement in a Globalized World Economy: An Empirical Exploration - WP/03/246
  • Volatility and Comovement in a Globalized World Economy: An Empirical Exploration - WP/03/246 (Markdown version)
  • Volatility and Comovement in a Globalized World Economy: An Empirical Exploration - WP/03/246 (PDF)