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

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  • Robin L. Lumsdaine
  • Eswar Prasad

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 stylised 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. 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. Copyright Royal Economic Society 2003.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 99/154.

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Length: 38
Date of creation: 01 Nov 1999
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Handle: RePEc:imf:imfwpa:99/154

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