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Global macroeconomic interdependence: a minimum spanning tree approach

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  • Tiago Trancoso

    (Lusiada University and Instituto Politecnico de Viana do Castelo)

Abstract

This paper measures the evolution of the interdependence level of the global economic system using a novel approach that combines network analysis and time-varying correlations. A Scalar-BEKK model is employed to determine the dynamic conditional bilateral correlations of 102 economies for the period 1952-2011. A subdominant ultrametric space is then defined for each year by applying a single-link cluster analysis to filter and highlight first-order connections in the network. I find the core of the global economic network to be dominated by advanced economies while the periphery is composed by nearly all of the developing economies and some of the emergent market economies; France occupies the central hub of the network, which coincides with recent findings from studies on European financial markets. I also find that the global macroeconomic interdependence rose over 61 percents between 1952-2011, which is in line with the majority of the empirical research on business cycle synchronization; however, this paper reveals an accelerating convergence process during the phase 1996-2011 that exceeds results from previous studies.

Suggested Citation

  • Tiago Trancoso, 2013. "Global macroeconomic interdependence: a minimum spanning tree approach," Review of Applied Socio-Economic Research, Pro Global Science Association, vol. 5(1), pages 179-189, June.
    • Handle: RePEc:rse:wpaper:v:5:y:2013:i:1:p:179-189
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    Cited by:

    1. Trancoso, Tiago, 2014. "Emerging markets in the global economic network: Real(ly) decoupling?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 395(C), pages 499-510.

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    More about this item

    Keywords

    macroeconomic interdependence; global convergence; international business cycles; network analysis; dynamic correlations;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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