Identifying the Common Component of International Economic Fluctuations: A New Approach

Robin L. Lumsdaine and Eswar Prasad
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Robin L. Lumsdaine: Deutsche Bank and NBER Research Department, IMF

Economic Journal, 2003, vol. 113, issue 484, 101-127

Abstract: In this paper, we develop 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 stylised features of the data documented in the paper. The model allows for a unified treatment of cyclical and seasonal fluctuations and also accommodates the dynamic propagation of shocks across countries. We find evidence for a "world business cycle" as well as evidence for a distinct European common component. We also find some evidence that macroeconomic fluctuations have become more closely linked across industrial economies in the period after 1973. Copyright Royal Economic Society 2003.

Date: 2003
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Related works:
Working Paper: Identifying the Common Component of International Economic Fluctuations: A New Approach (2002)
Working Paper: Identifying the Common Component in International Economic Fluctuations: A New Approach (1999)
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