International Macroeconomic Dynamics: A Factor Vector Autoregressive Approach
Università di Milano Bicocca; Università degli Studi di Milano-Bicocca - Department of Economics, Quantitative Methods and Business Strategies (DEMS); Center for Economic Research on Pensions and Welfare Policies (CeRP)
Fabio C. Bagliano
University of Turin - Department of Economics and Statistics; Center for Research on Pensions and Welfare Policies (CeRP); Collegio Carlo Alberto
November 1, 2006
Economic Modelling, Vol. 26, pp. 232-244, 2009
In this paper international comovements among a set of key real and nominal macroeconomic variables for the G-7 countries have been investigated for the 1980-2005 period, using a Factor Vector Autoregressive approach. We present evidence that comovements in macroeconomic variables do not concern only real activity, but are an important feature also of stock market returns, inflation rates, interest rates and, to a smaller extent, monetary aggregates. Both common sources of shocks and similar transmission mechanisms explain international comovements, with the only exception of Japan, where the idiosyncratic features seem to dominate. Finally, concerning the origin of global shocks, evidence of both global supply-side and demand-side disturbances is found.
Keywords: G7, international business cycle, factor vector autoregressive models, common factors
JEL Classification: C22, E31, E32
Date posted: November 20, 2006 ; Last revised: June 9, 2013
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