A1269
Title: Network analysis of business cycle synchronization using simultaneous equations with interactive effects
Authors: Ting Xie - University of York (United Kingdom) [presenting]
Abstract: The simultaneous equation panel data model is developed to jointly accommodate the local spatial correlation and the global factor dependence as well as parameter heterogeneity. The regional network analysis is then proposed to examine the diffusion impacts of the trade and financial intensities on business cycle synchronization (BCS). The CCEX-2SLS approach is applied to the dataset consisting of 136 country pairs in the 17 OECD countries over 1995-2019 and convincingly unveils that both trade and financial intensities can boost the BCS and the effects diffuse from high-income regions operating on or near the frontier to low-income regions. This suggests that policies to reduce trade barriers and encourage bilateral liberalization appear better suited to improve the BCS of net shock receivers, whilst policies to attract more investments are appropriate to their transmitters. In this regard, the importance of investing funds is stressed in peripheral regions to amplify regional BCS.
