Adding Space to the International Business Cycle
Growth fluctuations exhibit substantial synchronization across countries, which has been viewed as reflecting a global business cycle driven by shocks with worldwide reach, or spillovers resulting from local real and/or financial linkages between c...
| Main Authors: | , |
|---|---|
| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/756731553172566723/Adding-Space-to-the-International-Business-Cycle http://hdl.handle.net/10986/31434 |
| id |
okr-10986-31434 |
|---|---|
| recordtype |
oai_dc |
| spelling |
okr-10986-314342022-05-21T06:14:39Z Adding Space to the International Business Cycle Abate, Girum Dagnachew Serven, Luis ECONOMIC GROWTH BUSINESS CYCLES SPATIAL ECONOMICS TOTAL FACTOR PRODUCTIVITY TRADE LIBERALIZATION SPECIALIZATION Growth fluctuations exhibit substantial synchronization across countries, which has been viewed as reflecting a global business cycle driven by shocks with worldwide reach, or spillovers resulting from local real and/or financial linkages between countries. This paper brings these two perspectives together by analyzing international growth fluctuations in a setting that allows for both global shocks and spatial dependence. Using annual data for 117 countries over 1970-2016, the paper finds that the cross-country dependence of aggregate growth is the combined result of global shocks summarized by a latent common factor and spatial effects accruing through the growth of nearby countries -- with proximity measured by bilateral trade linkages or geographic distance. The latent global factor shows a strong positive correlation with worldwide TFP growth. Countries' exposure to global shocks rises with their openness to trade and the degree of commodity specialization of their economies. Despite its simplicity, the empirical model fits the data well, especially for advanced countries. Ignoring the cross-country dependence of growth, by omitting spatial effects or common shocks (or both) from the analysis, leads to a marked deterioration of the empirical model's in-sample explanatory power and out-of-sample forecasting performance. 2019-03-21T18:53:43Z 2019-03-21T18:53:43Z 2019-03 Working Paper http://documents.worldbank.org/curated/en/756731553172566723/Adding-Space-to-the-International-Business-Cycle http://hdl.handle.net/10986/31434 English Policy Research Working Paper;No. 8786 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ECONOMIC GROWTH BUSINESS CYCLES SPATIAL ECONOMICS TOTAL FACTOR PRODUCTIVITY TRADE LIBERALIZATION SPECIALIZATION |
| spellingShingle |
ECONOMIC GROWTH BUSINESS CYCLES SPATIAL ECONOMICS TOTAL FACTOR PRODUCTIVITY TRADE LIBERALIZATION SPECIALIZATION Abate, Girum Dagnachew Serven, Luis Adding Space to the International Business Cycle |
| relation |
Policy Research Working Paper;No. 8786 |
| description |
Growth fluctuations exhibit substantial
synchronization across countries, which has been viewed as
reflecting a global business cycle driven by shocks with
worldwide reach, or spillovers resulting from local real
and/or financial linkages between countries. This paper
brings these two perspectives together by analyzing
international growth fluctuations in a setting that allows
for both global shocks and spatial dependence. Using annual
data for 117 countries over 1970-2016, the paper finds that
the cross-country dependence of aggregate growth is the
combined result of global shocks summarized by a latent
common factor and spatial effects accruing through the
growth of nearby countries -- with proximity measured by
bilateral trade linkages or geographic distance. The latent
global factor shows a strong positive correlation with
worldwide TFP growth. Countries' exposure to global
shocks rises with their openness to trade and the degree of
commodity specialization of their economies. Despite its
simplicity, the empirical model fits the data well,
especially for advanced countries. Ignoring the
cross-country dependence of growth, by omitting spatial
effects or common shocks (or both) from the analysis, leads
to a marked deterioration of the empirical model's
in-sample explanatory power and out-of-sample forecasting performance. |
| format |
Working Paper |
| author |
Abate, Girum Dagnachew Serven, Luis |
| author_facet |
Abate, Girum Dagnachew Serven, Luis |
| author_sort |
Abate, Girum Dagnachew |
| title |
Adding Space to the International Business Cycle |
| title_short |
Adding Space to the International Business Cycle |
| title_full |
Adding Space to the International Business Cycle |
| title_fullStr |
Adding Space to the International Business Cycle |
| title_full_unstemmed |
Adding Space to the International Business Cycle |
| title_sort |
adding space to the international business cycle |
| publisher |
World Bank, Washington, DC |
| publishDate |
2019 |
| url |
http://documents.worldbank.org/curated/en/756731553172566723/Adding-Space-to-the-International-Business-Cycle http://hdl.handle.net/10986/31434 |
| _version_ |
1764474322321145856 |