Informational Economic Transmission between Countries

Alejandro Bernales, Hriday Karnani and Paula Margaretic
Additional contact information
Hriday Karnani: Columbia University
Paula Margaretic: University of Chile

Review of Economic Dynamics, 2025, vol. 58

Abstract: Informational economic transmission is crucial even after accounting for countries' fundamental real and financial connections. Informational connections emerge from anomalous interdependence in agents' beliefs about countries' economic activity. We propose measuring this interdependence through the correlation (between countries) of analysts' one-year forecast errors about countries' economic performance. Our measure is based on a learning model in which informational transmission occurs when agents incorrectly assess the quality of new information regarding common factors that affect multiple countries simultaneously, due to learning frictions. Informational interdependence remains substantial under various validity analyses and robustness checks, and after addressing endogeneity concerns in several dimensions. Additionally, we demonstrate considerable higher-order spillovers of economic shocks. (Copyright: Elsevier)

Keywords: Informational interdependence; Spatial econometric model; Correlation of forecast errors; Learning bias; Common factors (search for similar items in EconPapers)
JEL-codes: D80 F30 F60 G14 G15 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://dx.doi.org/10.1016/j.red.202101302
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See https://www.sciencedirect.com/ for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:issued:24-151

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2025.101302

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().