Identifying the Common Component of International Economic Fluctuations: A new Approach

Lumsdaine, Robin L.; Prasad, Eswar

doi:10.1111/1468-0297.00093

Cited by 148 publications

(75 citation statements)

References 44 publications

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“…For the estimation of the common component of financial development proxies FD, we follow the methodology proposed by Lumsdaine and Prasad (2003) [49]. This procedure takes place in three stages.…”

Section: Methodsmentioning

confidence: 99%

Financial Reforms, Financial Development, and Economic Growth in the Ivory Coast

Sanogo

Moussa

2017

Economies

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This study investigates the relationship between financial development and economic growth in the Ivory Coast over the period from 1961 to 2014. The final goal of this research is to develop a procedure to identify the effects of financial reforms for the Ivory Coast economic growth. Therefore, to achieve this goal, we first conducted a common component analysis (CCA) on our time series data to create: (1) a variable that would be the most appropriate proxy for the financial development; and (2) a vector of control variables for economic growth. Second, a vector autoregression model (VAR) with restriction was used as an appropriate specification of the dynamic relationship between the proxy of financial development, economic growth and other important factors of that growth (vector of control variables). Results suggest that in the Ivory Coast, growth in financial development is synonymous with the overall economic growth of the national economy. This study addresses the controversy over the appropriate proxy for the financial development in the Ivory Coast and it establishes a causal relationship between the financial development and the national economic growth.

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Section: Methodsmentioning

confidence: 99%

Financial Reforms, Financial Development, and Economic Growth in the Ivory Coast

Sanogo

Moussa

2017

Economies

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“…17 Figure (9) shows the impulse response functions to an unexpected monetary policy shock. 18 We can see in particular that real GDP decreases at impact but then tends to recover to its initial level and that global liquidity quickly drops after an increase in short-term rates and the effect is longlasting. Only the price index does not respond in the expected way.…”

Section: A Global Approachmentioning

confidence: 97%

“…(2001) and Lumsdaine and Prasad (2003). 13 The choice of including global liquidity in the euro area benchmark VARs as a fully exogenous variable could also be considered.…”

Section: Global Liquidity Spilloversmentioning

confidence: 99%

Monetary policy shocks in the euro area and global liquidity spillovers

2007

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This paper analyses the international transmission of monetary shocks with a special focus on the effects of foreign money ("global liquidity") on the euro area. We estimate structural VAR models for the euro area and the global economy including a global liquidity aggregate. The impulse responses obtained show that a positive shock to extra-euro area liquidity leads to permanent increases in the euro area M3 aggregate and the price level, a temporary rise in real output and a temporary appreciation of the real effective exchange rate of the euro. Moreover, we find that innovations in global liquidity play an important role in explaining price and output fluctuations in the euro area and in the global economy.JEL classification: E52.

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“…For example, Lumsdaine and Prasad (2003) identify a world business cycle along with evidence that macroeconomic uctuations across countries have been increasingly linked since 1973. Imbs (2006) shows that correlations in GDP uctuations across countries rise with nancial market integration.…”

Section: Introductionmentioning

confidence: 99%

The World Business Cycle and Expected Returns*

Cooper

Priestley

2012

Review of Finance

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Abstract. We study the predictability of stock returns using a pure macroeconomic measure of the world business cycle, namely the world's capital to output ratio. This variable tracks variation in expected stock returns in a group of the major industrial economies in the presence of world nancial market based predictor variables. The world's capital to output ratio exhibits strong out-of-sample predictive power in almost all countries studied. This is in contrast to nancial market based variables that almost never have out-of-sample forecasting power. Using the stock return predictability that we uncover, we nd that international versions of conditional asset pricing models perform well. The world capital to output ratio also predicts bond returns, interest rate changes and credit spreads. The results highlight the importance of world business conditions for nancial markets.

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Identifying the Common Component of International Economic Fluctuations: A new Approach

Cited by 148 publications

References 44 publications

Financial Reforms, Financial Development, and Economic Growth in the Ivory Coast

Financial Reforms, Financial Development, and Economic Growth in the Ivory Coast

Monetary policy shocks in the euro area and global liquidity spillovers

The World Business Cycle and Expected Returns*

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