The emergence of temporal correlations in a study of global economic interdependence

Eric Friedman, Simon Johnson and A. S. Landsberg

Quantitative Finance, 2003, vol. 3, issue 4, 296-305

Abstract: We develop a simple firm-based automaton model for global economic interdependence of countries using modern notions of self-organized criticality and recently developed dynamical renormalization-group methods. We demonstrate how extremely strong statistical correlations can naturally develop between two countries even if the financial interconnections between those countries remain very weak. Potential policy implications of this result are also discussed.

Date: 2003
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DOI: 10.1088/1469-7688/3/4/306

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