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

Robin Lumsdaine and Eswar Prasad

No 1999/154, IMF Working Papers from International Monetary Fund

Abstract: This paper develops 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 stylized features of the data documented in the paper. The model allows for a unified treatment of cyclical and seasonal fluctuations and also captures the dynamic propagation of shocks across countries. Correlations of individual country fluctuations with the common component provide evidence of a “world business cycle” and a distinct European common component. The results suggest that macroeconomic fluctuations have become more closely linked across industrial economies in the post–Bretton Woods period.

Keywords: WP; time-varying weight; IP growth; simple average; weighting scheme; Economic Fluctuations; International and European Business Cycles; Autoregressive Conditional Heteroskedasticty; country size; business cycle volatility; technology shock; IP index; shocks constant; country-specific shock; shock to country; Industrial production; Production growth; Business cycles; Factor models; Industrial sector; Global (search for similar items in EconPapers)
Pages: 38
Date: 1999-11-01
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Citations: View citations in EconPapers (9)

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