Identifying the Common Component in International Economic Fluctuations; A New Approach
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.
Year of publication: |
1999-11-01
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Authors: | Lumsdaine, Robin L. ; Prasad, Eswar |
Institutions: | International Monetary Fund (IMF) |
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