 Comovements in the real activity of developed and emerging economies: A test of global versus specific international factorsJournal of Applied Econometrics, 2020, vol. 35, issue 3, 344-370 Abstract: Although globalization has shaped the world economy in recent decades, emerging economies have experienced impressive growth compared to developed economies, suggesting specific comovements within developed and emerging business cycles. Using observed developed and emerging real economy activity variables, we investigate whether the latter assertion can be supported by observed data. Based on a two‐level factor model, we assume these activity variables can be decomposed into global components, emerging or developed common components, and idiosyncratic national shocks. We propose a statistical test for the null hypothesis of a one‐level specification, where it is irrelevant to distinguish between emerging and developed latent factors against the two‐level alternative. This paper provides a theoretical justification and Monte Carlo simulations that document the testing procedure. An application of the test to various data sets of developed and emerging countries leads to strong statistical evidence of specific comovements within these two groups. Date: 2020 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:japmet:v:35:y:2020:i:3:p:344-370 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Applied Econometrics is currently edited by M. Hashem Pesaran More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd. |
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