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The emergence of temporal correlations in a study of global economic interdependence

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  • Eric Friedman
  • Simon Johnson
  • A. S. Landsberg

Abstract

We develop a simple firm-based automaton model for global economic interdependence of countries using modern notions of self-organized criticality and recently developed dynamical renormalization-group methods. We demonstrate how extremely strong statistical correlations can naturally develop between two countries even if the financial interconnections between those countries remain very weak. Potential policy implications of this result are also discussed.

Suggested Citation

  • Eric Friedman & Simon Johnson & A. S. Landsberg, 2003. "The emergence of temporal correlations in a study of global economic interdependence," Quantitative Finance, Taylor & Francis Journals, vol. 3(4), pages 296-305.
    • Handle: RePEc:taf:quantf:v:3:y:2003:i:4:p:296-305
    DOI: 10.1088/1469-7688/3/4/306
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    References listed on IDEAS

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    1. Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel, 1999. "What caused the Asian currency and financial crisis?," Japan and the World Economy, Elsevier, vol. 11(3), pages 305-373, October.
    2. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "What Caused the Asian Currency and Financial Crisis? Part I: A Macroeconomic Overview," NBER Working Papers 6833, National Bureau of Economic Research, Inc.
    3. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "What Caused the Asian Currency and Financial Crisis? Part II: The Policy Debate," NBER Working Papers 6834, National Bureau of Economic Research, Inc.
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