Measuring the world economy

Badinger, Harald (2013) Measuring the world economy. The World Economy, 36 (1). pp. 12-30. ISSN 1467-9701


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This paper provides an empirical assessment of whether the world economy has become smaller in terms of economic distance over the last decades. We adopt a cross-sectional spatial econometric approach, relating domestic output volatility to (distance-weighted averages of) other countries' output volatility, using a sample of 135 countries and rolling 10-year time windows over the period 1955 to 2006. Using descriptive measures, test statistics, and spatial econometric estimates, we find that cross-country interdependence was virtually insignificant in the early post-war period but has increased strongly from the mid-1960s to the mid-1980s and remained at a high level since then. Results for the most recent period suggest that common shocks to output volatility have a magnified impact and roughly quadruplicate through international spillover effects, which are transmitted through both trade and financial openness.

Item Type: Article
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Keywords: financial openness, spillovers, trade, output volatility
Classification Codes: JEL C21, E32, F15, F40
Divisions: Departments > Volkswirtschaft > Internationale Wirtschaft
Forschungsinstitute > Europafragen
Version of the Document: Accepted for Publication
Depositing User: Gertraud Novotny
Date Deposited: 15 Mar 2017 16:26
Last Modified: 24 Jul 2020 14:40
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