Adding Space to the International Business Cycle

Abate, Girum Dagnachew ; Serven, Luis

World Bank, Washington, DC

关键词: ECONOMIC GROWTH;    BUSINESS CYCLES;    SPATIAL ECONOMICS;    TOTAL FACTOR PRODUCTIVITY;    TRADE LIBERALIZATION;   

DOI  :  10.1596/1813-9450-8786
RP-ID  :  WPS8786

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Growth fluctuations exhibit substantialsynchronization across countries, which has been viewed asreflecting a global business cycle driven by shocks withworldwide reach, or spillovers resulting from local realand/or financial linkages between countries. This paperbrings these two perspectives together by analyzinginternational growth fluctuations in a setting that allowsfor both global shocks and spatial dependence. Using annualdata for 117 countries over 1970-2016, the paper finds thatthe cross-country dependence of aggregate growth is thecombined result of global shocks summarized by a latentcommon factor and spatial effects accruing through thegrowth of nearby countries -- with proximity measured bybilateral trade linkages or geographic distance. The latentglobal factor shows a strong positive correlation withworldwide TFP growth. Countries' exposure to globalshocks rises with their openness to trade and the degree ofcommodity specialization of their economies. Despite itssimplicity, the empirical model fits the data well,especially for advanced countries. Ignoring thecross-country dependence of growth, by omitting spatialeffects or common shocks (or both) from the analysis, leadsto a marked deterioration of the empirical model'sin-sample explanatory power and out-of-sample forecasting performance.