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Changes in Economic and Financial Synchronisation: A Global Factor Analysis

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  • Alessandro Maravalle
  • Łukasz Rawdanowicz

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.

Suggested Citation

  • Alessandro Maravalle & Łukasz Rawdanowicz, 2018. "Changes in Economic and Financial Synchronisation: A Global Factor Analysis," OECD Economics Department Working Papers 1517, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1517-en
    DOI: 10.1787/ba7c5c04-en
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    Cited by:

    1. Khowaja, Kainat & Shcherbatyy, Mykhaylo & Härdle, Wolfgang Karl, 2021. "Surrogate Models for Optimization of Dynamical Systems," IRTG 1792 Discussion Papers 2021-001, Humboldt University of Berlin, International Research Training Group 1792 "High Dimensional Nonstationary Time Series".
    2. Paitoon Chetthamrongchai & Sudawan Somjai & Thitinan Chankoson, 2020. "The contribution of macroeconomic factors in determining the economic growth, export and the agricultural output in agri-based ASEAN economies," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 7(3), pages 2043-2059, March.

    More about this item

    Keywords

    co-movement; dynamic factor models; Financial and trade integration; international business cycle;
    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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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