Measuring the Connectedness of the Global Economy

Matthew Greenwood-Nimmo, Viet Hoang Nguyen, Yongcheol Shin

    Research output: Contribution to journalArticle


    We develop a technique to exploit forecast error variance decompositions to evaluate the macroeconomic connectedness embedded in any multi-country macroeconomic model with an approximate vector autoregressive (VAR) representation. We apply our technique to a large global VAR model covering 25 countries and derive vivid representations of macroeconomic connectedness. We find that the US exerts a dominant influence in the global economy and that Brazil, China, and the Eurozone are also globally significant. Recursive analysis over the period of the global financial crisis shows that shocks to global equity markets are transmitted rapidly and forcefully to real trade flows and real GDP.
    Original languageEnglish
    Pages (from-to)899-919
    JournalInternational Journal of Forecasting
    Issue number2
    Publication statusPublished - 2021


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