Identifying the Common Component in International Economic Fluctuations A New Approach
38 Pages Posted: 15 Feb 2006
Date Written: November 1999
This paper develops 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 captures the dynamic propagation of shocks across countries. Correlations of individual country fluctuations with the common component provide evidence of a "world business cycle" and a distinct European common component. The results suggest that macroeconomic fluctuations have become more closely linked across industrial economies in the post-Bretton Woods period.
Keywords: Economic Fluctuations International and European Business Cycles Autoregressive Conditional Heteroskedasticty
JEL Classification: E32 C51 E37
Suggested Citation: Suggested Citation