OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Changes in Economic and Financial Synchronisation

A Global Factor Analysis

We estimate dynamic factor models for two sub-samples between 1995 and 2017 for up to 42 advanced and emerging-market economies to investigate changes in the contribution of global and regional factors to fluctuations in real GDP per capita growth, inflation, 10-year government bond yields and equity prices. The combined average contribution of global and regional factors in explaining fluctuations of GDP growth and inflation increased between 1995-2006 and 2007-17. In contrast, for financial variables, the role of country-specific factors strengthened between these two periods. The general findings are robust to alternative specifications of the lag structure, data frequency and the country composition of the largest region. Country-specific factors explain a higher share of variation of financial variables in emerging-market economies compared with advanced economies. For all variables, there is large cross-country heterogeneity regarding the level of contributions of specific factors and their evolution over time.


Keywords: international business cycle, dynamic factor models, Financial and trade integration, co-movement
JEL: E32: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Business Fluctuations; Cycles; E44: Macroeconomics and Monetary Economics / Money and Interest Rates / Financial Markets and the Macroeconomy; F44: International Economics / Macroeconomic Aspects of International Trade and Finance / International Business Cycles; C38: Mathematical and Quantitative Methods / Multiple or Simultaneous Equation Models; Multiple Variables / Classification Methods; Cluster Analysis; Principal Components; Factor Models
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error