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

Robin L. Lumsdaine and Eswar Prasad
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Robin L. Lumsdaine: Brown University

No 487, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 stylized 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. Based on correlations of individual country fluctuations with the common component, 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.

Keywords: international and European business cycles; autoregressive conditional heteroskedasticity; economic fluctuations (search for similar items in EconPapers)
JEL-codes: C51 E32 E37 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2002-04
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Citations: View citations in EconPapers (4)

Published - published in: Economic Journal, 2003, 113 (484), 101-127

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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 in International Economic Fluctuations: A New Approach (1999)
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