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International interdependency of macroeconomic activities: a multivariate empirical analysis


  • Sanjay Kumar Rout

    (Centre for Development Studies)

  • Hrushikesh Mallick

    (Centre for Development Studies)


Given the international interdependency of macroeconomic activities, this study attempts to examine three fundamental questions; (i) what is the time pattern of international interdependency?, (ii) what is the magnitude of international interdependency?, and (iii) which are the major channels through which international interdependency occur?. These questions are investigated among major economies viz. the US, Japan, Germany, China, India and Russia. Employing generalized impulse response of unrestricted VAR model, the Diebold and Yilmaz (Int J Forecast 28(1):57–66, 2012) spillover method and orthogonal impulse response of restricted VAR model, the study found that the global economies are highly interdependent. Therefore, we strongly argue that channels through which interdependency between countries occur are based on economic structure of respective economies. From the findings, it explicitly indicates that if there is rise or fall of macroeconomic activity in any specific economy, it may lead to rise or fall in economic activity of other individual economies. It shows a positive correlationship between the movement of economic actvities among the countries. Given the higher degree of international interdependency, it may sometimes lead to larger cost for the individual economies. Therefore, it suggests that the formulation and implementation of rigorous macroeconomic policies are the need of the hour for respective economies. Considering the gaps in the previous literature, this study tries to contribute to the literature by investigating cross-country time profile of interactions, magnitude of interactions and channels through which interactions occur.

Suggested Citation

  • Sanjay Kumar Rout & Hrushikesh Mallick, 2021. "International interdependency of macroeconomic activities: a multivariate empirical analysis," International Economics and Economic Policy, Springer, vol. 18(2), pages 425-450, May.
  • Handle: RePEc:kap:iecepo:v:18:y:2021:i:2:d:10.1007_s10368-020-00483-1
    DOI: 10.1007/s10368-020-00483-1

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    References listed on IDEAS

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    1. Sanjay Kumar Rout & Hrushikesh Mallick, 2022. "Sovereign Bond Market Shock Spillover Over Different Maturities: A Journey from Normal to Covid-19 Period," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(4), pages 697-734, December.

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    More about this item


    Advanced economies; Emerging economies; International interdependency; Macroeconomic activities; Vector autoregressive model; Impulse response function; Diebold and Yilmaz spillover method;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F6 - International Economics - - Economic Impacts of Globalization
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity


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