Changes in Economic and Financial Synchronisation: A Global Factor Analysis

Alessandro Maravalle and Lukasz Rawdanowicz ()

No 1517, OECD Economics Department Working Papers from OECD Publishing

Abstract: We estimate dynamic factor models for two sub-samples between 1995 and 2017 for up to 42 advanced and emerging-market economies to investigate changes in the contribution of global and regional factors to fluctuations in real GDP per capita growth, inflation, 10-year government bond yields and equity prices. The combined average contribution of global and regional factors in explaining fluctuations of GDP growth and inflation increased between 1995-2006 and 2007-17. In contrast, for financial variables, the role of country-specific factors strengthened between these two periods. The general findings are robust to alternative specifications of the lag structure, data frequency and the country composition of the largest region. Country-specific factors explain a higher share of variation of financial variables in emerging-market economies compared with advanced economies. For all variables, there is large cross-country heterogeneity regarding the level of contributions of specific factors and their evolution over time.

Keywords: co-movement; dynamic factor models; Financial and trade integration; international business cycle (search for similar items in EconPapers)
JEL-codes: C38 E32 E44 F44 (search for similar items in EconPapers)
Date: 2018-11-28
New Economics Papers: this item is included in nep-mac and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1517-en

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