Advanced Search
MyIDEAS: Login to save this paper or follow this series

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

Contents:

Author Info

  • Lumsdaine, Robin L.

    (Brown University)

  • Prasad, Eswar

    ()
    (Cornell University)

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.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://ftp.iza.org/dp487.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 487.

as in new window
Length: 46 pages
Date of creation: Apr 2002
Date of revision:
Publication status: published in: Economic Journal, 2003, 113 (484), 101-127
Handle: RePEc:iza:izadps:dp487

Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information:
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:

Related research

Keywords: international and European business cycles; autoregressive conditional heteroskedasticity; economic fluctuations;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Allen C. Head, 1995. "Country Size, Aggregate Fluctuations, and International Risk Sharing," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 28(4b), pages 1096-1119, November.
  2. James H. Stock & Mark W. Watson, 1993. "A Procedure for Predicting Recessions with Leading Indicators: Econometric Issues and Recent Experience," NBER Chapters, in: Business Cycles, Indicators and Forecasting, pages 95-156 National Bureau of Economic Research, Inc.
  3. J. Joseph Beaulieu & Jeffrey A. Miron, 1991. "A Cross Country Comparison of Seasonal Cycles and Business Cycles," Papers, Boston University - Industry Studies Programme 0011, Boston University - Industry Studies Programme.
  4. Forni, Mario & Reichlin, Lucrezia, 1995. "Dynamic Common Factors in Large Cross-Sections," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1285, C.E.P.R. Discussion Papers.
  5. Francis X. Diebold & Marc Nerlove, 1986. "The dynamics of exchange rate volatility: a multivariate latent factor ARCH model," Special Studies Papers, Board of Governors of the Federal Reserve System (U.S.) 205, Board of Governors of the Federal Reserve System (U.S.).
  6. Stephen G. Cecchetti & Anil K. Kashyap & David W. Wilcox, 1997. "Interactions between the seasonal and business cycles in production and inventories," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago WP-97-06, Federal Reserve Bank of Chicago.
  7. Francis X. Diebold & Glenn D. Rudebusch, 1994. "Measuring Business Cycles: A Modern Perspective," NBER Working Papers 4643, National Bureau of Economic Research, Inc.
  8. Stephen G. Cecchetti & Anil K Kashyap, 1995. "International Cycles," NBER Working Papers 5310, National Bureau of Economic Research, Inc.
  9. Beaulieu, J Joseph & MacKie-Mason, Jeffrey K & Miron, Jeffrey A, 1992. "Why Do Countries and Industries with Large Seasonal Cycles also Have Large Business Cycles?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(2), pages 621-56, May.
  10. Altonji, Joseph G & Ham, John C, 1990. "Variation in Employment Growth in Canada: The Role of External, National, Regional, and Industrial Factors," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 8(1), pages S198-236, January.
  11. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 11(4), pages 369-80, October.
  12. Stockman, Alan C., 1988. "Sectoral and national aggregate disturbances to industrial output in seven European countries," Journal of Monetary Economics, Elsevier, Elsevier, vol. 21(2-3), pages 387-409.
  13. Norrbin, Stefan C. & Schlagenhauf, Don E., 1996. "The role of international factors in the business cycle: A multi-country study," Journal of International Economics, Elsevier, Elsevier, vol. 40(1-2), pages 85-104, February.
  14. Artis, Michael J & Zhang, Wenda, 1999. "Further Evidence on the International Business Cycle and the ERM: Is There a European Business Cycle?," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 120-32, January.
  15. Diebold, Francis X. & Pauly, Peter, 1990. "The use of prior information in forecast combination," International Journal of Forecasting, Elsevier, Elsevier, vol. 6(4), pages 503-508, December.
  16. Franses, Philip Hans & Hylleberg, Svend & Lee, Hahn S., 1995. "Spurious deterministic seasonality," Economics Letters, Elsevier, Elsevier, vol. 48(3-4), pages 249-256, June.
  17. Marco Lippi & Lucrezia Reichlin, 1994. "Common and uncommon trends and cycles," ULB Institutional Repository 2013/10153, ULB -- Universite Libre de Bruxelles.
  18. Canova, Fabio & Ghysels, Eric, 1994. "Changes in seasonal patterns : Are they cyclical?," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 18(6), pages 1143-1171, November.
  19. Christoffersen, Peter F & Giorgianni, Lorenzo, 2000. "Interest-Rate Arbitrage in Currency Baskets: Forecasting Weights and Measuring Risk," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 18(2), pages 242-53, April.
  20. Ghysels, Eric, 1997. "Seasonal Adjustment and Other Data Transformations," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 15(4), pages 410-18, October.
  21. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, Econometric Society, vol. 57(2), pages 357-84, March.
  22. Gregory, Allan W & Head, Allen C & Raynauld, Jacques, 1997. "Measuring World Business Cycles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 677-701, August.
  23. Lumsdaine, Robin L. & Ng, Serena, 1999. "Testing for ARCH in the presence of a possibly misspecified conditional mean," Journal of Econometrics, Elsevier, Elsevier, vol. 93(2), pages 257-279, December.
  24. Tamim Bayoumi & Eswar Prasad, 1997. "Currency Unions, Economic Fluctuations, and Adjustment: Some New Empirical Evidence," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 36-58, March.
  25. Baxter, M. & Stockman, A.C., 1988. "Business Cycles And The Exchange Rate System: Some International Evidence," RCER Working Papers 140, University of Rochester - Center for Economic Research (RCER).
  26. Adrian Pagan, 1997. "Towards an Understanding of Some Business Cycle Characteristics," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 30(1), pages 1-15.
  27. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  28. Eswar Prasad & Tamim Bayoumi, 1996. "Currency Unions, Economic Fluctuations, and Adjustment," IMF Working Papers 96/81, International Monetary Fund.
  29. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, Elsevier, vol. 10(2), pages 139-162.
  30. Engle, Robert F & Hylleberg, Svend, 1996. "Common Seasonal Features: Global Unemployment," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 615-30, November.
  31. Deutsch, Melinda & Granger, Clive W. J. & Terasvirta, Timo, 1994. "The combination of forecasts using changing weights," International Journal of Forecasting, Elsevier, Elsevier, vol. 10(1), pages 47-57, June.
  32. Gerlach, H M Stefan, 1988. "World Business Cycles under Fixed and Flexible Exchange Rates," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 20(4), pages 621-32, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp487. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.