What Ties Us Together? Explaining Synchronized GDP Volatility

Lorenzo Ductor, Danilo Leiva-Leon () and Javier Adrián López Artero ()
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Javier Adrián López Artero: https://observatorio-cientifico.ua.es/investigadores/363610/detalle?lang=en_US

No 26-10, Working Papers from Federal Reserve Bank of Boston

Abstract: Amid heightened policy uncertainty, understanding the drivers of global macroeconomic instability becomes increasingly critical. This paper studies the determinants of output volatility synchronization using data for 42 economies worldwide. We construct a bilateral time-varying index of volatility synchronization and infer its drivers using Bayesian model averaging, complemented by weighted average least squares (WALS) and least absolute shrinkage and selection operator (LASSO) regression. We find that differences in total factor productivity, interest rate, and fiscal policy volatility robustly explain cross-country synchronization, with nuances between developed and developing countries. Overall, the results highlight the role of technological divergence and macroeconomic policy uncertainty in shaping the international co-movement of output volatility.

Keywords: macroeconomic volatility; Bayesian model averaging; total factor productivity; interest rate volatility; output volatility (search for similar items in EconPapers)
JEL-codes: C23 E32 F44 (search for similar items in EconPapers)
Pages: 16
Date: 2026-07-01
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedbwp:103627

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DOI: 10.29412/res.wp.2026.10

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