Abstract
AbstractThis article 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 from 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.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
