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

By R. Lumsdaine, Eswar S. Prasad. Social Science Research Network, 2003

199 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/007500f3d7bff80be0d80e4b52df111092ecb52d

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In Economics and Econometrics

Citations in the corpus

Business Cycle Transmission from the US to Germany: A Structural Factor Approach (2007, unknown): “…IMF (2001b), GCEE (2001) 5 for example, Stock and Watson (2003), Monfort, Renne, Rüffer and Vitale (2003), Kose, Otrok and Whiteman (2003a,b), Lumsdaine and Prasad (2003), Kose, Prasad and Terrones (2003a), Bayoumi and Helbling (2003), Norrbin and Schlagenhauf (1996) 5 these models rely on…”
Will business cycles in the Euro Area converge: a critical survey of empirical research (2008, background): “In contrast, Lumsdaine and Prasad (2003) find that the European component is more important than the world component.”
How Does Globalization Affect the Synchronization of Business Cycles? (2003, unknown): “For instance, Glenn Otto et al. (2001) and Jean Imbs (2002) nd that trade and nancial linkages are important in accounting for business-cycle comovement among OECD economies.”
Similarities and Convergence in G-7 Cycles (2007, background): “This result should be contrasted with Lumsdaine and Prasad (2003) and Artis et al. (2003) who instead detected the presence of a EU cycle using IP data.”
Are European business cycles close enough to be just one (2006, unknown): “Recent examples are Lumsdaine and Prasad (2003), Canova, Ciccarelli and Ortega (2003), or Gregory, Head and Raynauld (1997).”
HAVE NATIONAL BUSINESS CYCLES BECOME MORE SYNCHRONIZED (2003, background): “12 See, among others, Gerlach (1988), Gregory, Head, and Raynauld (1997), Lumsdaine and Prasad (1999), Kose, Otrok, and Whiteman (2002), Monfort and others (2002), and Helbling and Bayoumi (2003).”
A real time coincident indicator of the euro area business cycle (2001, background): “7McDermott and Scott (2000), Lumsdaine and Prasad (1999), Cheung and Westermann (2000), Dickerson et al. (1998), Artis et al. (1999).”
Global Private Information in International Equity Markets (2009, unknown): “Lumsdaine and Prasad (2003) estimate a common component in industrial production growth rates in 17 Organization for Economic Co-operation and Development (OECD) countries.”
Understanding the Evolution of World Business Cycles (2005, background): “Lumsdaine and Prasad (2003) develop a weighted aggregation procedure, and examine the correlations between the fluctuations in industrial output in seventeen OECD countries and an estimated common component.”
Business Cycle Synchronization in the Enlarged EU (2008, background): “This points toward the emergence of a “world business cycle” noted also by several authors, such as, for example, Gerlach (1988), Lumsdaine and Prasad (2003) and Kose et al. (2003).”