MULTIPLE DETERMINANTS OF BUSINESS CYCLE SYNCHRONIZATION

Cigdem Akin
February 10, 2006
George Washington University
Department of Economics
1922 F Street, NW
Old Main, Suite 208
Washington, DC 20052 USA
Phone: ++1 (202) 994 6150
Fax: ++1 (202) 994 6147
E-mail: cigdem@gwu.edu
Key words:

synchronization, business cycles

The phenomenon of globalization and the synchronized slowdown of major world

economies alongside contagious nature of financial crisis in emerging markets have recently
incited the interest in understanding propagation of business cycle fluctuations across national
borders. Despite the recent surge in trade and financial flows, studies have been unable to
distinguish a clear-cut tendency for synchronization. One major reason is that various
transmission channels can influence output correlations in both directions when we take into
account the complexity and varying degree of intensity across the world. In order to fully
decipher this result, further research needs to be conducted about the underlying forces behind the
co-movement of world economies. Identifying the global, regional as well as country-specific
determinants of synchronization has important policy relevance for long-run feasibility of
regional economic integration and optimum currency areas.
In this respect, this study looks at the multiple channels of business cycle synchronization
in a unified framework and introduces new variables such as trade intensity, intra-industry trade,
trade partner similarity, free trade area membership, economic similarity, global financial
integration and macroeconomic policy similarity measures as well as global oil shocks to explain
the economic linkages behind synchronization of 47 countries including 27 emerging markets.
First part of the paper looks at the regional evolution of major economic linkages and bilateral
contemporaneous correlations of cyclical components of real GDP, investment and consumption
for oil shock, debt crisis and globalization periods. Second part of the paper conducts a GMM-IV
and simultaneous equations estimations on output synchronization for 1970-2003. Results show
that bilateral trade intensity, intra-industry trade and similarity in economic structures are the
most important determinants of output correlations. There are no statistically significant effects
from trade partner similarity, free trade area membership and being commodity exporter when
macroeconomic policy measures are accounted for. Specifically, there is evidence that similarity
in idiosyncratic fiscal shocks increases bilateral output synchronization while bilateral
real exchange rate volatility has no significant effect. On average global financial integration
has a positive but weak effect and synchronization increases for country pairs with higher degrees
of financial openness. Simultaneous equations estimation shows that there is a strong positive
feedback from financial openness to trade integration. Oil price shocks increase synchronization
for pairs with similar oil import dependencies. In conclusion, trade integration especially in the
form of intra-industry trade is the main driving force behind successful optimum currency areas.
JEL Classification: F42 F15 F36

I. Introduction
Over the last decades the wave of globalization has led to a tremendous increase in the
strength of economic linkages across the world. Successive trade liberalization contributed to an
increase in trade flows as well as structural changes in the economies of both developed and
emerging markets. Moreover, financial liberalization increased market access for short-term
equity and foreign direct investment, thereby leading to a massive surge in international capital
flows. The phenomenon of globalization and the synchronized slowdown of major world
economies alongside contagious nature of financial crisis in emerging markets have recently
incited the interest in understanding propagation of business cycle fluctuations across national
borders. There are two venues economies can move together. Synchronization can happen
because countries can face common shocks such as sharp movements in world interest rates,
abrupt changes in oil prices or similar fiscal and monetary policies; or national economies can
move together because of the international transmission of idiosyncratic shocks through
economic linkages such as trade or finance.
Identifying the degree of synchronization across economies and analyzing the global,
regional as well as country-specific determinants of international fluctuations are relevant from a
number of perspectives including short-run domestic and international policy coordination as well
as assessment of the long-run feasibility of monetary unions.
In this respect, this paper attempts to contribute to the synchronization literature by
looking at the multiple channels of business cycle synchronization in the world and primarily
gives attention to emerging market economies that existing literature has so far failed to study in a
unified framework. Paper introduces new variables such as trade intensity, intra-industry trade,
trade partner similarity, free trade area membership, economic similarity, global financial
integration and macroeconomic policy similarity measures as well as global oil shocks to explain
major economic linkages behind bilateral cycle synchronization for 47 countries including 27
emerging market economies. First part of the paper looks at the theoretical literature and
empirical work on business cycle synchronization. Second part of the paper introduces the data
and empirical methodology to calculate various linkages that have been found to be theoretically
relevant for business cycle co-movements. Stylized facts and evolution of major economic
linkages and bilateral real GDP, investment and consumption correlations for oil shock, debt
crisis and globalization periods are studied from the perspective of regional and income-based
classification of countries.

In the third part of the paper, in order to identify the most important determinants of
output correlations, GMM-IV and simultaneous equations regression models are conducted for
1970-2003 period. Results from the analysis show that bilateral trade intensity, intra-industry
trade and similarity in economic structures are the most important determinants of output
correlations. There are no statistically significant effects from trade partner similarity, free trade
area membership and being commodity exporter when similarity in macroeconomic policy
measures is accounted for. Specifically, there is evidence that similarity in idiosyncratic fiscal

shocks increases bilateral output synchronization while bilateral real exchange rate
volatility has no statistical effect. On average global financial integration has a positive but weak
effect and synchronization increases for country pairs with higher degrees of financial openness.
Simultaneous equation models show that there is a strong positive feedback from financial
openness to trade integration. Oil price shocks increase synchronization for pairs with similar oil
import dependencies. In conclusion, trade integration especially in the form of intra-industry trade
is the main driving force behind successful optimum currency areas.
II. Background on Theoretical and Empirical Literature
There has been a burgeoning research that has examined how integration affected the
synchronization of business cycles across different countries. Most of these recent studies
predominantly focus on identifying the changing nature of co-movements. Although important
common conclusions have been reached, depending on the country coverage, time period as well
as econometric techniques used in the analysis, there are still diverse findings about evolution of
business cycle synchronization. There are various transmission channels economic theory focuses
on in order to study how fluctuations in the level of economic activity in one country can spillover into other economies. As will be discussed, these channels however can influence output
correlations in either way therefore economic theory fails to provide us with any explicit
directions as to how enhanced cross country linkages will move business cycle synchronization
when we take into account the complexity and varying degree of intensity of these channels
across the world. Given this perspective the following section discusses the channels of business
cycle synchronization.

II.1 Trade in Goods and Services

Trade is an important linkage between countries. Theoretically, however, there is no
consensus on whether increased trade intensity leads to more or less correlation of cycles.
The effects of trade on output and investment co-movements depend on the intrinsic
characteristics of trade partners and on the nature of their relationships. For example, Eichengreen
(1992), Kenen (1969), and Krugman (1993) argue that if trade takes place mainly HeckscherOhlin type as usually observed in developing countries, specialization would induce the industrial
structures of the trading countries to diverge resulting in less synchronized business cycles. In
contrast, Kose and Yi (2001) propose that if trade is mainly of intra-industry type or vertical
specialization in various stages of production through outsourcing, then greater trade integration
is likely to lead to a higher synchronization as a result of symmetric industry-specific shocks.
Frankel and Rose (1998) also show that trade facilitates the transmission of aggregate
shocks across countries when positive shock in one country increases demand for goods produced
in other countries. The magnitude of such spillover depends on the intensity of trade among
countries. In addition to demand spillovers, as Coe and Helpman (1995) shows, the process of
trade integration could foster diffusion of productivity, knowledge and technological shocks.
Another dimension of the impact of trade on synchronization can be observed if countries
trade intensively with similar trade partners. Kose and Yi (2002) build a theoretical model with a
three country set up, international financial autarky and complete markets with transportation
costs. Their calibration results show that absolute changes in bilateral trade will not generate large
feedback effects if pairs constitute a small share of world GDP. They conclude that for small
countries what matters for their GDP correlation is not so much their bilateral trade but their
indirect trade with the rest of the world so in empirical analysis they suggest controlling for
intensity of third party trade.
In summary, the total effect of trade intensity on cycle correlation is theoretically
ambiguous and presents a question that could only be solved empirically. Important differences in
the pattern of trade and specialization among country pairs suggest that the impact of trade
integration on cycle correlation may differ substantially between developing and developed
countries. More generally, the mechanisms by which international trade affects business cycle
synchronization should be understood only when intra- and inter-industry trade effects are
accounted for separately. In addition co-movements can be enhanced if countries trade
intensively with same group of countries. From this perspective free trade agreements can
augment the impact of bilateral trade through demand spillovers from similar trade partners.

II.2 Financial Linkages

Financial market linkages are another widely acknowledged mechanism for the
international transmission of business cycle shocks. Over the last two decades both developing
countries and industrialized economies have experienced greater degree of financial openness as
measured by successive reductions of capital account restrictions and increasing amount of cross
border holdings of international assets and liabilities. Greater policy openness fostered a strong
increase in both short term and long term capital flows and generated higher correlations and comovements between financial markets around the world. But economists have divergent opinion
on how to interpret these figures for the real economy. Like with trade integration, effects of
financial integration are not clear cut and may have offsetting effects on real co-movements.
In theory, standard international real business cycle model by Backus, Kehoe and Kyland
(1992) shows that if international capital markets are well integrated, countries being insured
against idiosyncratic shocks can afford to exploit comparative advantage further. Specialization in
production will expose the countries to more industry or country specific shocks and therefore
lower the correlations of output and investment while diversification of consumption risk through
international asset trade will increase the consumption correlations.
This proposition is put into testing by Kalemli- Ozcan, Sorensen and Yosha in two
important papers. In their first paper (2003), they provide empirical evidence that risk sharing by
capital market integration enhances specialization in production. In their second paper, they show
empirically using data for OECD countries and US states that regions with a more specialized
production structure exhibit output fluctuations that are less correlated on average with aggregate
output. Combined with the causal relation running from capital market integration to regional
specialization found in their earlier study, they conclude that higher capital market integration
leads to less symmetric output fluctuations.
Although these papers have indicated a pattern of cycle synchronization and risk sharing
for industrialized economies, for developing countries however integration of capital markets has
created periodic crisis and boom-bust cycles of growth. Kose, Prasad, and Terrones (2003)
examines the impact of international financial integration on macroeconomic volatility for large
group of industrial and developing countries over period 1960-1990. They find that on average
volatility of output growth has declined in the 1990s relative to earlier decades but the volatility
of relative consumption growth has increased for more financially integrated developing
economies. They find that increasing financial openness has been linked with rising relative
volatility but only up to a certain threshold. Their coefficient estimates indicate that economies
with gross flows higher than 50 percent of GDP have improved consumption smoothing

possibilities and reduced relative output volatility. However such levels of gross capital flows are
typically experienced over sustained periods of time only by some industrial countries.
These findings are potentially consistent with the view that international financial
integration can promote domestic financial sector development which in turn can help to
moderate domestic macroeconomic volatility. Unfortunately most developing economies are well
below this threshold that moderate levels of financial integration have made them subject to even
greater volatility because insufficient financial integration perpetuates the underdeveloped nature
of domestic financial markets that inadvertently attracts more volatile and pro-cyclical short term
capital flows. Thus for many developing countries counter to the notion of risk-sharing, financial
integration happen to increase idiosyncratic macroeconomic fluctuations.
There is also another stream of literature that contrary to the predictions of Backus,
Kehoe and Kyland finds out higher GDP and investment correlations as a result of financial
linkages thus explaining the quantity anomaly. As discussed by Aizenman and Noy (2004) global
financial integration is strongly linked with trade openness and reinforces the positive effect on
business cycle synchronization in output and investment. Furthermore composition of capital
flows can have a significant influence on degree of business cycle synchronization. FDI linkages
act a lot like intra-industry trade and countries that are closely integrated through FDI may
transmit shocks to each other. FDI may also serve as a means by which technology is transferred.
A large body of literature on contagion argues that capital flows to different countries in
particular developing countries in the same region are synchronized through various channels of
financial contagion. Over the last decades it has been observed that short term capital flows are
positively correlated across developing countries either due to simultaneous liberalization of
capital markets or due to the herd behavior of international investors. Furthermore, many
developing countries rely heavily on external financing for their domestic investment and current
account deficits. The magnitude and volatility of capital flows from industrial countries can
therefore have a significant influence on investment and output performance of developing
countries and regional spillovers. Related with this, cross-country investment opportunities
through international equity holdings have made local financial asset prices more responsive to
world or regional financial conditions. As investors herd or capital flows follow similar patterns
across countries, financial integration has induced increasing co-movements of stock markets.
Linkages through equity investments may also explain contagion and synchronization of business
cycles between regions that are weakly linked in macroeconomic fundamentals. In conclusion,
financial linkages have intricate and ambiguous effects on business cycle synchronization.

II.3 Similarity in Economic Structure

Another important determinant of co-fluctuations is the similarity of production patterns
at the sectoral level even after holding financial and trade integration constant. Imbs (2003)
empirically documents a long-run upward trend in the extent of business cycle synchronization as
economies grow, become increasingly diversified and converge to similar production structure as
they grow rich while poor countries are typically characterized by limited diversification
associated with little co-fluctuations because they share few sectors with the rest of the world.
Furthermore dependence on production of non-fuel primary commodities creates terms of trade
fluctuations affecting the idiosyncratic volatility. Given the evidence, similarity of economic
structure at the sectoral level is by itself an important determinant of synchronization.
II.4 Institutional Similarity
Historical, legal as well as institutional similarity and common characteristics can also
make countries more susceptible to particular types of shocks or similar propagation mechanisms
thus may increase co-movements.
II.5 Economic Integration and Macroeconomic Similarity
Over the last decades, countries have engaged themselves in various forms of
cooperation. Although findings point out the positive influence of economic integration, actual
effects on business cycle correlations depend on the inherent characteristics of participating
countries and on the nature of their relationships. It might be the case that trade and financial
integration with diverse macroeconomic fundamentals as well as lack of policy coordination
might expose countries to asymmetric shocks and have dampening effects on synchronization.
As demonstrated with the European Union experiment, nominal macroeconomic
convergence in government balance, public debt and inflation rates is a critical precondition for
monetary integration and synchronization of European business cycle. Fatas and Mihov (1998)
show in standard real business cycle model that idiosyncratic fiscal shocks i.e. increases in
government spending have strong, persistent and positive impact on output. Especially for OECD
countries they identify an automatic stabilizer role for fiscal policy to smooth business cycles. On
the other hand Fatas and Mihov (2002) empirically show for 51 countries that governments that
use discretionary fiscal policy aggressively induce significant macroeconomic volatility of output.
Related with that, studies show there are major differences between developed and developing
countries in terms of fiscal policy behavior. While industrial countries can smooth out large

components of demand shocks with countercyclical fiscal policy, emerging markets often fail to
do so due to weak tax base, high dependence on commodity markets and borrowing constraints
during growth slowdowns. Kaminsky, Reinhart and Vegh (2004) find out for developing
countries that the capital flow cycle and macroeconomic cycle reinforce idiosyncratic shocks in
output and consumption and discretionary fiscal policy is highly pro-cyclical for most developing
countries and markedly so in middle income countries. In OECD countries by and large fiscal
policy is either countercyclical or acyclical. In conclusion similarity in fiscal policy behavior
could be an important factor affecting business cycles co-movements.
The association between monetary policy similarity or exchange rate stability and
behavior of macroeconomic aggregates is both theoretically and empirically unclear. Optimal
currency area literature points out three potential benefits from having stable exchange rates.
First, low exchange rate volatility can reduce transaction costs and stimulate trade integration.
Second reduced currency risk due to strict exchange rate regimes can enhance financial
integration. Third with tightly integrated capital markets, maintaining fixed exchange rate can
lead to a high degree of coordination of monetary policy that can increase co-movements.
However recent IMF study finds no negative association between exchange rate
volatility, trade and investment flows. On the real side of the economy, Baxter and Stockman
(1989) also provide evidence that there are no systematic differences in the behavior of output,
consumption and government consumption spending under alternative exchange rate systems.
Consistent with the above results, Kouparitsas (2003) looks at postwar international comovements of business cycles of G7 and ERM countries. He finds that there are examples of high
and low co-movement in both fixed and flexible exchange rate regimes and degree of comovement is only affected by the changing nature of underlying shocks and the propagation
mechanisms irrespective of the exchange rate regime.
II.6 Common shocks
Analysis of synchronization should control for common shocks in order to fully
understand the impact of other transmission channels. Rise in oil prices are usually associated
with recessions and it is known that cycles are globally more synchronized during such periods.
In summary, existence of various channels affecting business cycle synchronization and
intricate interdependency between them have been the major reason for the failure of economic
theory to pin down any explicit direction for how enhanced cross country linkages will move
business cycle synchronization.

III. Survey of Empirical Literature on Synchronization

Looking at the empirical literature, there are only few studies that have attempted to
measure the relative importance of these individual channels on business cycle synchronization.
There is already a broad consensus for both developed and developing countries that trade
linkages and similarity in economic structure enhance synchronization. However the link between
cycle synchronization and financial integration is the least researched area both in the context of
developed and developing countries. Furthermore literature has so far neglected measuring
relative importance of multiple channels of business cycle synchronization simultaneously and
existing studies have limited their scope to only developed countries. From this perspective,
before proposing this papers research agenda that will fill these gaps in the literature, the
following section reviews the existing empirical findings.
One of the key criteria in optimal currency area literature is that countries should join a
currency union if they have closer international trade links and more symmetric business cycles.
However seminal paper by Frankel and Rose (1998) argue that both cycle synchronization and
trade intensity can be endogenous because formation of currency unions may provide an
additional impetus for trade expansion that may result in higher business cycle correlation.
Therefore endogeneity of trade intensity must be controlled for by instrumenting it with gravity
variables of trade. After regressing the bilateral correlations of cyclical components of real GDP,
index of industrial production, total employment and unemployment rate on trade intensity,
Frankel and Rose find that closer international trade links result in more closely correlated
business cycles for 20 industrialized countries. In the same spirit, Gruben, Koo and Millis (2003)
extend the paper by Frankel and Rose by separating the effects of intra and inter-industry trade
flows for the same OECD countries and found that Frankel and Rose model overestimates the
effect of trade intensity. They find that inter-industry trade generally does not significantly
desynchronize business cycles because of the dominance of productivity spillovers and common
demand shocks but intra-industry trade contributes more to synchronization. Calderon and Stein
(2002) test whether results by Frankel and Rose hold true for developing countries. They found
for 147 countries between 1960-99 that countries with higher bilateral trade exhibit higher
business cycle synchronization and the impact of trade intensity on cycle correlation is smaller
the greater the production structure asymmetries between the countries. In a complementary
paper same authors show that impact of trade intensity is stronger for members of free trade
areas. Despite the results of these papers, Shin and Wang (2004) find using panel study of Asian
countries that the above argument is not generally true. Their study looks at three possible
channels for synchronization namely inter-industry trade, intra-industry trade and fiscal and

monetary policy coordination and showed that for Asian countries, intra-industry trade is the
major determinant of business cycle co-movements and synchronization is strengthened only
when increased trade is accompanied by more intra-industry trade.
As mentioned before although there is wealth of evidence on importance of trade and
similarity of economic structure and the robustness of these linkages has been reconfirmed by the
recent study by Baxter and Kouparitsas (2004) using data for co-movements of 100 developing
and developed countries, the link between cycle synchronization and financial integration is the
least researched area in the literature and there are only three papers that focus on the role of
financial integration alongside other channels. Imbs (2003) looks at the linkages between trade in
goods, financial openness, specialization and business cycles synchronization in the context of a
system of simultaneous equations for mainly developed countries. He finds that financial linkages
significantly increase synchronization even though countries also get more specialized and less
correlated as a result. In a subsequent paper, Imbs (2004) extends the same simultaneous equation
approach to cross-section of bilateral correlations for a core of 12 developed and periphery of 31
developing countries. Paper estimates the link between financial integration and GDP correlations
as well as financial integration and risk sharing as measured by consumption correlations. The
findings confirm the previous results that financially integrated economies have more
synchronized business cycles.1 Finally, Otto, Voss and Willard (2003) look at a number of
directions for business cycle synchronization using an extensive database for 22 OECD
economies for the period 19802000.2 Their results show that intensity of trade in goods,
financial integration, exchange rate stability, similarity of economic structures and a common
propensity to adopt new technologies all act to increase the synchronization.

1
Paper uses a Coordinated Portfolio Investment Survey (CPIS) with direct observations on bilateral asset holdings for
67 source and 223 destination countries in 2001 whereby holdings can be decomposed into equities, short-term and
long-term debt securities. Paper also uses capital and current account restriction indices to measure degree of financial
integration. Although this is an important contribution to the literature by studying the direct and indirect effects of
trade, economic structure, disaggregated capital flows as well as financial liberalization proxied by restriction indices,
the paper suffers from major limitations. Results of the regression system are unstable dependent on specifications of
the variables. The fact that components of CPIS are highly correlated among themselves and some economies were
absent from the data set due to underreporting in the survey has created multicollienarity problems in the estimation.
Another limitation is that the survey data is available for only 2001 and 2002.
2

They look at three broad types of transmission channels: trade in goods and services, trade in financial assets and the
coordination or similarity of monetary policies. They examine financial market linkages by looking at foreign direct
investment, trade in equities and trade in long term bonds. They use information on stocks and flows of FDI on bilateral
basis to measure the FDI linkages. For debt instruments, they use bilateral spreads in asset returns. For measuring
equity market integration, they compare mean absolute spread in the real returns of two countries stock indices. For
similarity of monetary policy, they consider the variation in the nominal bilateral exchange rate as a measure of the
fixity of exchange rates. Furthermore they control for similarity of economic structure between two countries. They
also introduce a new variable called index of openness to new technology in order to capture the relative degree of
penetration of information and communication technologies as a proxy for global spillovers of recent innovations.

10

There is empirical evidence on the role of fiscal convergence in cycle synchronization.

Darvas, Rose, Szapary (2005) show using a panel of 21 OECD countries and 40 years of annual
data as well as cross section of 115 countries that fiscal convergence in the form of persistently
similar ratios of government surplus or deficit to GDP is systematically associated with more
bilaterally synchronized business cycles because of the similarity in the behavior of idiosyncratic
fiscal shocks. Similarly Bergman (2004) finds for EMU countries that convergence of fiscal
policies lead to higher synchronization alongside trade integration. On the other hand Clark and
van Wincoop (2001) find no effect for European countries concluding that net effect on cycle
correlations can be small when country specific fiscal policy is both a source and stabilizer of
business cycles. Few papers explicitly look at the monetary policy alongside other channels and
mainly find no evidence for the role of monetary policy similarity and exchange rate stability.3
IV. Research Agenda
This paper looks at the intensity of economic linkages across the world in different
periods of time and identifies synchronization trends among different group of countries with
diverse regional, geographical and institutional characteristics. This research mainly contributes
to the literature by providing econometric analysis of multiple determinants of business cycle
synchronization in a unified framework for a large sample of developed and emerging market
economies. Although there is a broad consensus on the role of trade and similarity of economic
structures, there are only few studies that looked at the role of global financial integration. This
paper attempts to go beyond the existing research that used de-jure financial liberalization
measures and looks at the effective global financial integration by using gross private flows. It
also introduces new variables like trade partner similarity, policy coordination channels as well as
global common shocks. Understanding through which mechanisms economic shocks spread
across borders has important policy relevance to grasp the real dynamics of globalization.

3
Bergman (2004) shows that European business cycles have indeed been more synchronized during flexible exchange
rate period and monetary policy differentials contribute to synchronization. Clark and van Wincoop (2001) find no
evidence for monetary policy coordination and exchange rate stability. Kose, Prasad and Terrones (2003) also find no
association between monetary policy similarity and correlations with G-7 aggregates in consumption and output.

11

IV.1 Data
Countries included in the study:
There are 47 countries in this study, 27 of which are emerging market economies. Table 1
gives the list of countries classified according to regional groups.
Measurement of Variables:
1- Business Cycle Synchronization:
Business cycle is measured using real GDP for capturing aggregate economic activity
(Y), real gross fixed capital formation for investment (I) and real household consumption for
private consumption (C). All data are annual and measured using local currency prices. Business
cycle synchronization is measured bilaterally by computing simple contemporaneous correlation
between cyclical components of these variables for country i and j over time span following
Frankel and Rose (1998). For regression analysis bilateral correlations of cyclical component of
Y

real GDP ( ij) is preferably used because it captures the synchronization in aggregate economic
activity rather than the components.

Y ij = corr (yi, yj) = cov (yi, yj) /

var( yi ). var( yj )

There are 1081 bilateral correlations for all the countries. In order to isolate the cyclical
component, logarithm of real GDP, real investment and real consumption data are de-trended by
band-pass filter proposed by Baxter and King (1999).4
Cross sectional data is constructed for 1970-2003 period for the econometric analysis.
However in order to capture the stylized facts about the time variation in the strength of
synchronization as well as differences in economic linkages of regional and income groupings,
data is split into three separate time periods.
Period 1 from 1970-79 capturing the era of oil shocks
Period 2 from 1980-89 capturing the era of debt crisis in developing countries
Period 3 from 1990-2003 capturing the era of globalization.

There are several techniques used in business cycle literature to decompose economic variables into trend and cycle.
Although there is a lack of consensus, band-pass filter is a widely used and preferred method in synchronization
literature. Results obtained in this paper are replicated with first differencing and HP filter as well and robust to any of
these de-trending techniques. For the sake of brevity, they are not reported but are available upon request.

12

Construction of Major Variables that Affect Business Cycle Synchronization:

Trade Related Variables:
2- Bilateral Trade Intensity:
Average intensity of bilateral international trade between countries i and j during period
relative to their combined GDP is approximated by Trade1 measure.

Trade1 ij =

1
Xijt + Mijt

T t Yit + Yjt

X ijt denotes total merchandise exports from country i to j in year t, M ijt represents imports to i
from j, and Yi and Yj denotes nominal GDP in country i and j measured in US dollars at time t.
The trade volume measures are annual and in nominal terms converted to US dollars.
Trade2 is a measure of average bilateral trade relative to total trade of the two countries.

Trade2 ij =

1
Xijt + Mijt

T t Xi + Mi + Xj + Mj

The bilateral trade data is from the International Monetary Fund's Direction of Trade Statistics.
Annual nominal GDP at US dollars is obtained from World Development Indicators.
2- Intra-industry Trade:
In order to control for the effects of intra-industry trade alongside the volume of trade, a
measure of intra-industry trade intensity by Grubel and Lloyd (1975) is used:

Intratrade ij

1
=
T

Xijtk Mijtk
(1 ( Xijtk + Mijtk ) )

where X ijtk is total nominal exports of product k from country i to country j at time t and M ijtk is
total nominal imports of product k from country j to country i at time t. The measure is then
averaged for the time period under study.
Bilateral intra-industry trade data for 81 industries using four-digit (ISIC) classification is
obtained from Trade and Production Database 1976-99 by Nicita and Olarreaga (2001). Dataset is
originally constructed from UN Comtrade Database. All data used to construct structure of trade
series are annual.

13

3- Trade Partner Similarity:

Similarity of trade partners can influence synchronization if country pairs trade
intensively with same partners. In order to control for the third country demand spillovers,
following index is constructed following Thellesen (2003):
N

Tradepartner ij

Xist + Mist Xjst + Mjst

1
=

T t s i , j
Yit
Yjt

where X ist is total nominal exports from country i to country s at time t and M ist is total nominal
imports from country s to country i divided by nominal GDP of country i in US dollars. X

jst

is

total nominal exports from country j to country s and M jst is total nominal imports from country s
to country j divided by nominal GDP of country j. The absolute difference of trade intensities of
country i and j with country s is aggregated for the rest of N countries in the sample and then
averaged for the time period under study. Lower index refers to higher trade partner similarity.
4- FTA Membership:
In order to test whether free trade area membership enhances the international
transmission of business cycle shocks, FTA measure is constructed from the fraction of years that
a free trade agreement is in place for any country pair for the given time period. The data on free
trade agreements and customs unions is obtained from World Trade Organization.
Variables Related to Financial Integration:
5- ITO Capital Account Openness Measure:
IMFs Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER)
indices provide a binary indicator of restrictions on financial flows based on official statements of
national authorities. The well-known shortcoming is that they do not reflect the evolution of
financial openness over time. Chinn and Ito (2002) develop continuous measures of de-jure
financial openness using AREAER indices. This paper calculates the degree of financial
integration between country pairs i and j by taking the period average of the sum of two
countries Chinn and Ito measures. This index takes on higher values when pairs of countries are
officially more open to cross-border global capital transactions.

ITO ij =

1
(ITOit + ITOjt )
T t

14

6- Global Financial Integration:

Although data on bilateral trade flows have been widely available, bilateral foreign direct
investment positions as well as data on portfolio and debt holdings are fairly new to the literature.
Therefore comprehensive and consistent measure of effective bilateral financial integration for
both developed and developing countries is difficult to achieve. Furthermore the study by
Eichengreen and Park (2004) on capital flows shows that the extent of financial asset holdings
among developing countries is fairly limited and global financial flows has been clearly
dominated by flows from financial centers of developed countries.
One methodology to overcome this shortcoming of measuring direct financial integration
was developed by Imbs (2003) using Lane and Milesi-Ferreti (2001) dataset reporting cumulative
external positions for a large sample of developing and industrial economies.5 One major problem
with this methodology is that it is hard to interpret the results for countries that are both issuers
and recipients of capital flows like the United States and countries showing relatively balanced
net external positions like European Union members. Only Netherlands, Switzerland, Japan and
Germany in the Lane-Milesi dataset displays net issuer position for an extended period of time
whereas other developed and developing countries are net recipients of capital flows if not
switchers. Furthermore the effect of flows from third countries to the country pair in study could
not be captured by this measure. As argued by Lane and Milesi-Ferreti (2001), net foreign assets
positions are also inversely related to real interest rate differentials and other fundamentals like
relative output level, public debt and demographic factors. As a result Imbss measure reflects the
extent of interest rate differential between countries rather than measuring the level of bilateral
financial integration.
Given these limitations in the data and in the existing methodologies, this study
constructs a general measure of global financial integration for pairs of countries by summing the
ratio of gross private capital flows to GDP and averaging across period .
Finglobalization ij =

1
GPF
GPF
((
)it + (
) jt )

T t GDP
GDP

Imbs argue that two countries with massively positive (negative) net foreign assets holdings will tend to be both
issuers (recipients) of capital flows and should experience less bilateral flow than two economies where one is
structurally in surplus and the other in deficit. Bilateral financial integration measure will be higher for pairs of
countries with diverging external positions that are more likely to lend and borrow from each other than pairs of
countries with similar external positions. Lane - Milesi-Ferretti methodology is used to construct:
Finance

ij=

1
T

NFA

NFA

( GDP )it ( GDP ) jt

t

where NFA denotes the net foreign asset position in country i and j namely accumulated sum of net positions in foreign
direct investment, equities and debt.

15

The ratio of gross private capital flows (GPF) to GDP in U.S. dollars is obtained from
World Development Indicators from 1970-2003 and the GPF measure is the sum of the absolute
values of direct, portfolio and other investment inflows and outflows recorded in the financial
accounts of balance of payments statistics, excluding changes in the assets and liabilities of
monetary authorities and general government. Given the fact that this study covers a wide range
of issuer as well as recipient countries with different FDI, portfolio as well as debt flow
intensities, gross measure is a better proxy for studying the effects of global financial integration
on synchronization patterns. This measure is also useful in capturing the overall risk sharing
effect of global financial openness. Furthermore Claessens et. al (1995) show that differentiating
FDI, portfolio and debt flows into short term and long term categories might be misleading for
understanding the volatility and persistence of different types of flows. This measure overcomes
this problem by looking at the gross measure instead of FDI or debt flows separately.
Variables Related to Economic Structure:
7- Similarity of Economic Structure:
Index of concentration by Krugman (1991) is used extensively in the synchronization
literature to measure similarity in sectoral production patterns:

Structure ij =

T t

s =1

GDPi, s GDPj , s

GDPi
GDPj

GDPi,s denotes the value added in US dollars of sector s in country i and GDPi is the nominal
GDP in US dollars at year t. Structure i,j, is broad measure of the average of discrepancies in the
GDP shares of agriculture, industry and services sectors of the countries i and j over period . 6
8- Primary Commodity Exporter:
Excessive dependence on production of non-fuel primary commodities creates
vulnerability to terms of trade fluctuations. Commodity dummy is constructed for pairs of
countries whose average ratios of primary commodity export share (of merchandise exports) to
manufacturing export share both exceed 1 for the period . Export share data is obtained from
World Development Indicators.
Commoditydummy ij = 1 if

1
% Xagriculture + food + ores & metals
((
)i, j )t > 1

T t
% Xmanufacturing

Industry refers to ISIC divisions 10-45 and includes manufacturing (ISIC divisions 15-37). Agriculture corresponds to
ISIC divisions 1-5. Services correspond to ISIC divisions 50-99. Sectoral data is from World Development Indicators.

16

Institutional Similarity Variables:

9-Common Language:
A dummy variable is introduced for countries that share a common language. Common
language is a proxy for the historical, legal as well as institutional similarity between countries.
Macroeconomic Similarity and Policy Coordination Variables:
10- Fiscal Policy:
Fiscal shocks have strong, persistent and positive impact on output. Several papers in the
literature have measured fiscal policy similarity using correlation coefficient or mean absolute
difference of budget deficit to GDP ratios of country i and j for period .

One major problem

with this variable is that primary balance as proportion of GDP is strongly determined by the
cyclical stance of the economy. For example, tax revenues increase in good times therefore the
government budget surplus is endogenous to the cycle.
Given these limitations, this paper will look at the period average of the absolute
differences in the government spending to GDP ratios of country i and j.
Govtspending ij= 1
T

(
t

Govtspendi ng
Govtspendi ng
)it (
) jt
GDP
GDP

Data for general government final consumption expenditure includes government current
expenditures for purchases of goods and services including compensation of employees as well as
most of the expenditures on national defense and security.
Government spending differential has already been used in the previous literature as an
instrument for the budget deficit correlation however it will be better to introduce it directly as a
measure of fiscal policy similarity. As mentioned in the theoretical review, increasing
government spending can be an automatic stabilizer but at the same time aggressively used
discretionary

fiscal

policy

can

increase

idiosyncratic

output

volatility.

Furthermore

macroeconomic cycle is often reinforced by highly pro-cyclical government spending in the case
of developing countries. In this paper, averaging the government spending differences over a long
period of time will eliminate any concerns arising from cyclicality but will give us an indicator of
degree of convergence in government spending behavior.

Van Wincoop and Clark (2001), Thellesen (2003), Shin and Wang (2004), Bergman (2004) and Darvas, Rose,
Szapary (2005)

17

11- Exchange Rate Stability

One measure of monetary policy coordination is fixity of exchange rates. Otto, Voss and
Willard (2003) suggested using period standard deviation of quarterly difference in logarithms of
the bilateral real exchange rate between country i and j at time t.

RER ijt = E ijt *

CPIjt
CPIit

Realexchrate ij = ( log RER ijt)

Bilateral rates are calculated from IMF International Financial Statistics using nominal exchange
rates of both countries vis a vis U.S. dollar and consumer price index of country i and j.
Global Shocks
12- Oil Dependency and Oil Shock Index
In order to identify the pairs of countries that are net fuel exporters for the period , netfuel-exporter dummy is constructed.
Net-fuel-exporter dummy ij = 1 if 1

T
t

Mfuel Xfuel
)i, j , t ) < 0
Y

Proxy for the effects of oil price on pairs of countries with similar net fuel import
dependencies is captured by the following index used by Frankel and Rose (1998):
Oil ij =

Mfuel Xfuel
Mfuel Xfuel
1
( POILt * (
)i, t * (
) j, t )

T t
Y
Y

Oil index is constructed by taking the period average of the product of real price of oil
(nominal average crude oil price deflated by world CPI at 2000) and net fuel imports to GDP
ratios of country i and j. Oil price and world CPI are obtained from IFS. M fuel, X fuel and
nominal GDP values are all in current US dollars and are obtained from WDI.
IV.2 Descriptive Statistics and Stylized Facts about Synchronization
Having identified the countries included in the study as well as defined the methodology
to measure business cycle synchronization and linkages affecting co-movements, this section of
the paper presents the descriptive statistics and the stylized facts about the evolution of
synchronization. In order to understand the changes as well as regional patterns in
synchronization trends, 1081 bilateral correlations of 47 countries are constructed for real GDP,
investment and consumption cycles over the oil shock (1970-79), debt crisis (1980-89) and
globalization (1990-2003) periods.

18

In Figures 1-3, countries are grouped in geographical regions and according to free trade
areas and positive and negative correlations that are significant at 10 percent and 5 percent levels
are coded in color to indicate highly synchronized and countercyclical country pairs over that
time period. Figures 5-8 take a closer look at the interregional synchronization patterns in Europe,
G-7, Americas and Asia.
Several interesting observations can be made from these correlation matrices in terms of
clusters of highly synchronized country groups. It can be seen that for oil shock period, real GDP
cycles of G-7 countries including Japan are highly synchronized among each other. This is also
observed to a lesser extent for investment and consumption cycles. Real GDP of small open
economies in Europe such as Switzerland, Austria, Belgium, Denmark, Netherlands and Portugal;
in Latin America such as Chile and in Asia such as Korea, Hong Kong and ASEAN countries are
also highly correlated with some countries in G-7. Other regions in the world do not exhibit a
similar clustering for 1970-79 period. In fact for Latin America, members of Mercosur or Andean
free trade areas are not significantly correlated with each other. In Asia, Hong Kong GDP cycle is
correlated with Japan, Philippines, Malaysia and Thailand while bilateral Korean and Thai output,
investment and consumption correlations are also significant.
Looking at 1980-89 debt crisis period, it can notably be seen that real GDP and
consumption bilateral correlations become highly significant for some Latin American countries
like Chile, Mexico, Paraguay, Uruguay, Bolivia and Peru. Canadian investment cycle is highly
synchronized with Mexico, Chile, Paraguay and Bolivia. In Asia, during this period, output and
investment cycles become significantly correlated among ASEAN countries such as Indonesia,
Malaysia, Philippines and Singapore. In Europe, GDP cycles of small open economies like
Belgium, Finland, Sweden, Greece, Portugal and Spain are highly correlated among themselves
and European members of G-7 group. The same strong inter-group synchronization can no longer
be observed among G-7 countries during 1980-89. Japanese output and investment cycles remain
correlated with France, Italy and Canada however German, UK and US cycles are no longer
significantly associated with the rest of G-7 group.
During the globalization period, it can be clearly seen that formation of European Union
has created a strong regional cycle in output, investment and consumption. Although Netherlands
co-moves with the rest of the European Union in investment and consumption, its real GDP cycle
is predominantly countercyclical to the rest of Europe. It can be also seen that Mediterranean
countries form a synchronized group. One interesting observation is that during 1990-2003 UK
consumption is not significantly correlated with the rest of Europe. Scandinavian countries on the
other hand show high degree of output correlation with UK.

19

There is a clear pattern of bifurcation in GDP, investment and consumption correlations

among G-7 members from continental Europe and US, Canada and UK. Stock and Watson
(2003) also identify the emergence of two groups within G-7 consisting of Euro-zone countries
and English speaking countries within which correlations have increased but across which cycle
correlations have dropped. Japan with the exception of Italy does no longer exhibit any strong comovement with the rest of G-7 mainly due the recession after the burst of stock market bubble
and banking crisis in early 1990s.
In Americas, formation of NAFTA among US, Canada and Mexico created a strong
investment cycle among the members. American and Canadian output, investment and
consumption cycles become significantly synchronized during the globalization period. There is
no apparent cycle from any of the other regional integration arrangements in Latin America.8
Significant correlations in output and investment can only be observed among bilateral pairs of
Brazil with Colombia and Peru while Chilean consumption cycle is significantly associated with
Uruguay, Colombia, Peru and Venezuela. Mexico displays predominantly negative correlations in
output, investment and consumption with the rest of Latin America due to Tequila crisis.
In Asia it can be seen that with the globalization, cyclical association between Japan,
Korea, Hong Kong and ASEAN countries become highly visible. On the other hand Australia,
New Zealand, China and India do not exhibit strong cyclical relationship with this group of
countries. In fact Australian output and investment cycle is countercyclical to Japan and Korea.
In conclusion, when we look at the overall picture of bilateral correlations and the highly
synchronized pairs of countries, regional cyclical clusters in European Union and among Japan,
Korea, Hong Kong and ASEAN countries have become more evident from oil shock period to
globalization in comparison to Latin America and G-7.
In Table 2 and Figure 4, average bilateral output, investment and consumption
correlations are computed and magnitudes as well as the trend of these correlations are compared
for each period on the basis of income groups and geographical regions.
For all countries, average real GDP correlations show that there is no discernible change
in the degree of output synchronization between countries across time periods.9 On the average
bilateral correlations in investment is same between 1980-89 and 1990-2003 but has increased in

Arroyo (2002) also makes the same observation that degree of integration and business cycle synchronization in Latin
America is very weak in comparison to other sub-regional arrangements in the world like NAFTA, ASEAN and
European Union.

This result is consistent with the findings of Kose, Prasad and Terrones (2003) that also show that common global
factor has not significantly changed the extent of business cycle co-movement across sub-periods and on average there
is little evidence that co-movements have become more synchronized during the period of globalization.

20

comparison to 1970s. There is no clear change in bilateral consumption correlations from first
period to globalization however second period bilateral correlations are on average higher.
When developed and emerging market pairs are studied separately, it can be seen that
developed countries have the highest bilateral correlations in output, investment and consumption
in all periods in comparison to other income groups. On average bilateral output correlations
among developed country pairs are highest in oil shock period and unchanged from 1980-89 to
1990-2003. Both investment and consumption correlations are highest in globalization period.
For emerging market country pairs, there is evidence that on the average output, investment and
consumption correlations are increasingly becoming more synchronized during the globalization
period. For developed-emerging market pairs, results indicate that synchronization of output,
investment and consumption of North-South pairs decline during globalization period.10
Looking at the regional trends, results show that for Europe synchronization in output and
investment increase in 1980-89 and 1990-2003 relative to oil shock period. Consumption
correlations are highest during 1980s but roughly unchanged in 1990s. For European Union,
bilateral output, investment and consumption correlations are higher in globalization period
although average output correlations are almost the same during the oil shock period. For G-7
group, bilateral output, investment and consumption correlations are on average the highest in
1970s and decline steadily over time or remain unchanged in 1980s and 1990s.11
For Americas, regional bilateral synchronization is stronger in 1980s than any other
period. For output and consumption, correlations somewhat decline in globalization and are
roughly equal to first period. For investment, correlations are higher in globalization period than
1970s. In Latin America, all output, investment and consumption correlations are the highest in
1980s during the debt crisis but correlations somewhat declined in globalization period although
still higher than 1970s.
Finally for Asia, average bilateral correlations increase with globalization in comparison
to any other periods. There is a secular increasing trend in investment synchronization for entire
Asia as well as Japan, Korea, Hong Kong and ASEAN group from oil shock period to
globalization. Average correlations among this sub-regional group more than double the average
correlations in the entire Asian region.
When we look at the magnitudes of average correlations in Table 2, it is clearly visible
that across time periods, ranking of the regions tend to change. For the oil shock period, G-7

10

Kose et. al also show that for developing countries correlations of individual country output and consumption growth
fluctuations with the fluctuations of G-7 aggregates decline in the 1990s.

11

Heathcote and Perri (2001) find similar results for declining cross country correlations among G-7 countries.

21

countries have the highest average bilateral synchronization in output followed by Japan, Korea,
Hong Kong and ASEAN group and European Union. G-7 and European Union investment and
consumption correlations are the highest in this time period although G-7 average far exceeds the
European Union. There is almost no output synchronization in Latin America during 1970s.
During the debt crisis period, it can be clearly seen that Latin American averages become
the highest among all the regions followed by G-7 and European Union. Japan, Korea, Hong
Kong and ASEAN output correlations significantly dropped in comparison to oil shock period but
investment correlations increased.
Finally during the globalization period, Asian sub-regional group composed of Japan,
Korea, Hong Kong and ASEAN countries, European Union and G-7 have the highest average
correlations in output. For investment and consumption cycle, European Union has the highest
average followed by the Asian sub-regional group. G-7 averages fall behind European overall
average. On the other hand Latin American correlations drop towards the end of the ranking
although higher than the oil shock period.
Table 2 also shows that average bilateral consumption correlations are almost always
lower than output correlations for all income and regional groups supporting the previous
literature that quantity anomaly exists and consumption risk sharing possibilities have not been
fully exploited yet.
In the following section, averages of major variables affecting business cycle
synchronization will be compared for each period on the basis of income groups and geographical
regions in order to identify any congruence with synchronization trends in the world. Tables 3-6
give the descriptive statistics and stylized facts about trade, financial integration, macroeconomic
and structural similarity measures.
IV.3 Descriptive Statistics and Stylized Facts about Linkages Affecting Synchronization
Trade Integration:
Table 3 shows that for all countries and income groups on the average trade intensity,
intra-trade intensity and diversification of trade partners are rising from 1970-79 to globalization
period. There is also an increasing trend towards formation of free trade areas. For emerging
market economies when country pairs with Singapore and Hong Kong are excluded, it can be
clearly seen that trade integration measures are roughly the same for 1970s and 1980s but trade
intensity and intra-industry trade have substantially accelerated with globalization together with
trade partner diversification and FTA formation. Comparatively, highest bilateral trade volume,
intra-industry trade and FTA measures are observed for developed country pairs. Trade partner

22

similarity is also higher among developed countries. There is virtually no FTA formation for
developed-emerging market and emerging market pairs in earlier periods but it increases with the
globalization period. Highest free trade area integration is seen among developed country pairs.
When trade integration is compared at the regional level, for European pairs, trade
volume and intra-industry trade intensity measures are roughly similar in oil shock and debt crisis
periods but increase with globalization. There is an increasing trend in trade partner
diversification and FTA formation. For European Union, all trade integration measures secularly
increase from 1970-79 to 1990-2003. FTA formation completed in 1990s.
For G-7, trade intensity volume increased secularly in all periods. Intra-industry trade
intensity measure is roughly the same in 1970s and 1980s but increased in 1990s. Trade partner
diversification and FTA formation increase over the decades.
For pairs in Americas, trade volume measures and intra-industry trade are roughly similar
in 1970s and 80s but increased in 1990s. Trade partner diversification and FTA formation is
increasing secularly. For Latin American pairs, trade volume is increasing secularly from 1970s
to 1990s. Intra-trade intensity is roughly the same in 1970s and 1980s but increased in 1990s.
Trade partner diversification is increasing. FTA formation increase dramatically in 1990s.
For Asian pairs controlling for Singapore and Hong Kong that are trading hubs, there is a
secular rising trend in all trade integration measures and they increase dramatically in 1990s.
When average magnitudes are compared, the ranking of trade intensity measures is
roughly unchanged across all time periods. G-7 and European Union pairs have the highest trade
intensity measures and Japan, Korea and ASEAN pairs increased their intensity in 1990s. Latin
America has the lowest trade integration. In terms of trade partner similarity, Latin American
pairs have the most similar trading partners in all periods. Trade partner diversification increased
for overall Asia and Japan, Korea, ASEAN pairs over time.
Financial integration:
For all the countries in Table 4, there is a secular trend towards financial globalization in
terms of higher gross private flows to GDP ratios and capital account openness. Both measures
significantly increase in globalization period. For emerging market pairs, gross private flows to
GDP are roughly equal for 1970s and 1980s but increase dramatically in 1990s. Capital account
restrictions in emerging markets get severer in 1980s and significantly liberalized in 1990s.
For developed countries there is a secular rising trend in gross private capital flows and
capital account openness. Comparatively highest financial integration and openness in capital
account regime are observed in all periods among developed country pairs.

23

In Latin America, capital account restrictions are in place during 1980s but capital
account openness significantly increases in 1990s again. In contrast Asia experiences progressive
liberalization of capital account regime.
Comparatively, ranking of financial integration changes over time. Latin American pairs
have declining gross private flows to GDP ratios whereas Asian financial openness increases.
European Union and G-7 countries have the highest measures. In terms of capital account
openness Latin American economies have the lowest de-jure capital account openness measure.
Macroeconomic Similarity:
Table 5 shows that for all countries, average differences in government spending to GDP
ratios are roughly similar for each period. It is observed that government spending behavior of
developed-emerging market pairs are significantly divergent giving support to the view that there
are differences in discretionary fiscal policy between developed countries and emerging markets.
Real exchange rates are the most stable bilaterally among developed country pairs across
time. The volatility within the emerging market pairs is the greatest. There is virtually no bilateral
real exchange rate variation in Asia and Japan, Korea, Hong Kong and ASEAN sub- regional
group. Real exchange rate variation in Latin America and Americas is higher than the average of
real exchange rate variability in all countries especially in 1980s.
Structural Similarity:
Table 6 shows that for all country pairs, similarity in economic structure is roughly
unchanged across periods. Developed countries of G-7 and European Union have the most similar
economic structures whereas developed-emerging market pairs diverge the most.
Over the decades, there is a substantial decline in the number of country pairs that are
non-fuel primary commodity exporters due to export diversification. Emerging market pairs had
43 percent commodity producers in 1970s and this figure drops to 34 percent in 1980s and to 7
percent in 1990s. Similar declining trend is visible in other income categories. Share of
commodity exporters has substantially declined in all regions, dropped to almost 1 percent in
Asia from 22 percent. In Latin America, during 1970s all the countries were commodity
exporters, this number dropped to 46 percent of the group in 1990s. Export diversification
significantly increased in Asia as can be seen in intra-industry trends in Table 4. Latin America is
still a predominantly commodity producing region despite export diversification. Furthermore
highest number of net-fuel exporting pairs can be found in Latin America.

24

All these results shed some light on the previous finding that regional economic
integration in Latin America has failed to generate significant cyclical co-movements. First of all
Latin America has the lowest intra-regional trade integration and intra-industry trade and is still
predominantly dependent on commodity exports. Furthermore as observed by Arroyo (2002),
levels of trade openness are also different among countries. While Central American countries
and Mexico are very open, Mercosur countries are relatively closed. Andean Community has an
intermediate level of openness. As found in this paper, trade partner similarity is the highest in
Latin America in comparison to all other regions. In fact, trade with US and Canada and
European Union exceeds intra-regional trade for Mercosur countries. Latin American countries
have the lowest global financial integration measures in comparison to other regions. With the
exception of NAFTA, there is also little evidence for intra-regional financial integration. In
contrast, major sources of international banking and equity flows come from European Union, the
United States, Canada and Japan. Finally when it comes to macroeconomic convergence and
volatility, regional arrangements in Latin America suffer from periodic exogenous shocks,
divergent macroeconomic and fiscal performance and exchange rate instability among members.
Considering these factors, despite high correlations observed during 1980s due to debt crisis, it
can be clearly seen that there is hardly any evident trend for regional synchronization when
contrasted with NAFTA, ASEAN and European Union. Thus formation of free trade areas is no
guarantee for higher synchronization if member countries have low degrees of trade and financial
integration, diverse macroeconomic fundamentals as well as lack of policy coordination.
Having identified the stylized facts and trends, the next stage of this paper is going to
look at the determinants of business cycle synchronization in output in a regression framework
for the entire period of 1970-2003. In the following section, GMM-IV and three-stage-least
squares simultaneous equations regression models will be explained and estimation results will be
presented. Finally the marginal impacts of significant variables over the average output
correlation will be calculated.
V. Econometric Methodology
Business cycle synchronization is measured bilaterally by computing simple
contemporaneous correlation between cyclical components of real GDP for country i and j over
time period 1970-2003. Output measure captures the aggregate economic activity and cyclical
component is derived by using band pass filter.

Y ij = corr (yi, yj) = cov (yi, yj) /

var( yi ). var( yj )

25

There are in total 1081 bilateral correlations for 47 countries included in the study. However due
to missing data for some countries, results are obtained using 702 bilateral correlations.12
Econometric estimation of bilateral business cycle correlations is conducted using GMM-IV.

Y ij = 1 + 2 Tij + 3 Fij + 4 Mij + 5 Sij + 6 Xij +

(1)

where Tij captures the bilateral trade integration using fta and logarithms of trade1, trade2,
intratrade and tradepartner measures. Fij captures the financial globalization of the country pairs
using logarithm of finglobalization measure. In order to distinguish the impact of different
degrees of financial openness, country pairs with more than one standard deviation above or
below the average logarithm of finglobalization measure are given dummy variable to identify
pairs with high and low degrees of financial openness.13 In the regression analysis these dummy
variables are interacted with logarithm of finglobalization measure to estimate the differential
effect of different degrees of openness on synchronization. Mij includes the measures related to
macroeconomic similarity. Logarithm of govtspending measure and logarithm of realexchrate
measure are used in the regression to estimate the effects of fiscal policy similarity and the
bilateral real exchange rate volatility. Sij includes variables related to similarity of economic
structure such as logarithm of structure, commoditydummy and oil measures. Finally Xij includes
variables that capture the fixed characteristics such as geographical region and common language.
Table 9 shows the GMM-IV and OLS estimation results of the model. Trade1, trade2 and
intratrade measures are introduced separately in three different specifications. Table 10 shows the
diagnostic tests conducted for each specification. Durbin-Wu-Hausman tests clearly indicate that
trade variables are endogenous and need to be instrumented with standard gravity variables.
Larger economies have higher trade volumes therefore logarithm of the product of average real
GDPs of two countries is a good instrument to capture the overall economic size of the pair.
Logarithmic product of average populations of two countries is another instrument for bilateral
trade intensity and intra-industry trade because big countries have higher volumes of trade.
Finally distance matters because geographical proximity facilitates the trade integration between
countries. First stage results and instrument quality tests show that gravity variables are
appropriate instruments for trade measures therefore estimation results are robust to weak
identification or underidentification problems. Overidentification tests and C-statistics show that
12

Belgium, China, Germany, Israel, Paraguay, Poland, Romania, Switzerland and South Africa are not included in the
regression analysis.

13

Table 7 shows that 114 country pairs have high degree of financial globalization. Pairs with United Kingdom, Hong
Kong, Singapore and Netherlands are included in this category due to the fact that these countries are international
financial and banking centers. 74 pairs have low degree of financial globalization. Specifically pairs with Bolivia,
Colombia, Peru, Morocco, Egypt, Indonesia, India, Turkey and Greece fall into the category of low financial openness.

26

excluded instruments are orthogonal to the errors and other variables like finglobalization,
govtspending and realexchrate are truly exogenous and need not be instrumented.
Despite the fact that Pagan-Hall statistics fail to reject the null that errors are
homoscedastic, estimation of the model is still done with GMM-IV method. GMM-IV estimation
in the absence of heteroscedasticity is asymptotically no worse than 2SLS-IV in large samples.
But most importantly for synchronization variable there might be a problem with independency
between observations when one countrys idiosyncratic business cycle influences the correlation
coefficients with the rest of the countries in the sample. For example German-Japan correlation
over 1970-2003 period may not be independent from German-France correlation over the same
period. Advantage of GMM-IV method is that it provides a robust estimation when observations
from the same group are correlated with each other but not with observations from other groups.14
Results from the analysis show that bilateral trade intensity, intra-industry trade and
similarity in economic structures are the most important determinants of bilateral output
correlations. There are no statistically significant effects from trade partner similarity when
bilateral trade intensity relative to GDP and intra-industry trade is controlled for. However there
is weak effect from trade partner diversification when bilateral trade relative to total trade
measure is used. These results do not give support to the conclusion of Kose and Yi (2002) that
for small countries what matters for their GDP correlation is not so much their bilateral trade but
their indirect trade with the rest of the world. On the contrary this paper finds that bilateral trade
intensity is the most important factor for cycle synchronization.
There is also no statistically significant evidence that free trade area membership
increases synchronization when similarity of macroeconomic policy measures is accounted for.
Specifically, there is evidence that similarity in idiosyncratic fiscal shocks increases bilateral

output synchronization while bilateral real exchange rate volatility has no statistical effect.
Nevertheless fiscal policy does not have a significant influence when intra-industry trade intensity
is controlled for. These results also confirm the previous discussion that being a member of free
trade area by itself does not increase synchronization between pairs if trade intensity, similarity of
economic structure and convergence in macroeconomic fundamentals are not strong. Furthermore
there is also no significant evidence that common cultural background increases synchronization.
On average global financial integration has a positive but weak effect in second and third
specifications when bilateral trade relative to total trade and intra-industry trade measures are
used. Financial openness coefficient ceases to be significant when bilateral trade volume to GDP

14

Clark and van Wincoop (2001) and Thellesen (2003) use GMM-IV estimation precisely to address the same problem.

27

ratio is controlled for. This result indicates that strong bilateral trade integration relative to the
size of the economies dominates the effect from gross capital flows. However results show that
country pairs with high degree of financial openness benefit from higher output synchronization.
Commodity exporters have higher synchronization but this effect is not significant. Oil price
shocks increase synchronization for pairs with similar oil import dependencies.
When marginal effects of variables are computed, one standard deviation increase in
bilateral trade intensity relative to total GDP raises average correlation from 0.116 to 0.225. One
standard deviation increase in trade1 measure roughly corresponds to fivefold increase in bilateral
trade to total GDP ratio. Similarly for trade2 and intratrade measures, one standard deviation
increase in those variables raises correlations by 0.09. It is notable that impact of intra-industry
trade is very big. Structural similarity measure increases the average correlations from 0.116 to
0.16. Likewise finglobalization and govtspending variables roughly increase average output
correlation by 0.02. In conclusion, trade integration especially in the form of intra-industry trade
is the main driving force behind output synchronization followed by structural similarity.
Equation (1) provides an estimate of the total effects on cycle synchronization. However
there are various feedback effects between economic linkages that can not be identified using
reduced form estimation. For example relationship between financial openness and trade
integration or similarity of economic structures and patterns of trade can not be explicitly
measured. Coefficient estimates in the reduced form contains not only the direct effect of the
variable on cycle synchronization but also the indirect effects emanating through other variables.
Therefore in order to separate direct and indirect impact of economic linkages on business cycle
synchronization and identify the feedback between variables, simultaneous equations system
similar to Imbs (2004) is estimated.

Y ij = 1 + 2 Tij + 3 Fij + 4 Mij + 5 Sij + 6 Xij + 1ij

(1)

Tij = 1 + 2 Fij + 3 Sij + 4 I Tij+ 2ij

(2)

Fij = 1 + 2 Tij + 3 Sij + 4 I Fij+ 3ij

(3)

Sij = 1 + 2 Tij + 3 Fij + 4 I Sij+ 4ij

(4)

First equation measures the output synchronization using the same variables and logarithmic
transformation as in GMM-IV model. Identification of the system however requires distinct
instruments for Tij, Fij and Sij. 15
15

Gravity measures are used as instruments for trade equation. ITO capital account openness measure instruments for
financial globalization suggesting that countries with higher levels of capital account liberalization can engage in
greater volumes of financial asset transaction in international capital markets. ITO measure is not introduced in
logarithms. Other instruments are population and distance. For structure equation, logarithm of average real per capital

28

Table 12 shows the results from three-stage-least-squares estimation of the three models
using different measures for trade integration.16 Results from first equations show that trade
integration variables in all specifications have comparable and similar coefficient estimates to
GMM-IV model. Structure variable is highly significant as a determinant of output correlations.
Oil measure has statistically positive but weak effect on output synchronization. Interestingly
financial globalization, government spending similarity, real exchange rate measure, FTA
membership, common language and trade partner similarity give the expected coefficient signs
but have no statistically significant effect on synchronization when direct and indirect effects as
well as feedbacks between variables are controlled for. Trade equations in Model I and Model III
show that financial openness increases bilateral trade volume to GDP ratio and intra-industry
trade intensity. However the effect is not robust to bilateral trade volume to total trade measure.
Furthermore structural similarity stimulates bilateral trade integration and intra-industry trade.
Gravity variables all have expected coefficients signs showing that larger economies trade more
and geographical proximity increases bilateral trade. In the finance equation, similar feedback
effect from trade intensity is observed. Countries that have high degrees of trade integration and
intra-industry trade are also the pairs that engage in higher volumes of international financial
transactions. Differences in economic structures stimulate financial integration giving support to
the view that countries that are specialized in production diversify their idiosyncratic output and
consumption risk by engaging in international asset transactions in global capital markets. Small
countries pairs are found to be more financially open. Finally structure equation shows that
bilateral trade integration, intra-industry trade as well as financial openness converge economic
structures between countries. This finding gives support to the existing literature that intraindustry trade and FDI stimulates integration of various stages of production through outsourcing.
Disparity between development levels of two countries diverges the economic structures.
Table 13 measures the direct and indirect effects of one standard deviation increase in
variables on average band pass filter output correlations estimated by 3SLS method.

17

Results

show that total effect of bilateral trade increases average output correlations from 0.11 to about

difference between two countries is used as an instrument for economic similarity on the basis of the argument by Imbs
(2003) that economies diversify and converge to similar productive structures as they develop.
16

Number of observations is lower than GMM-IV model because data for ITO measure is not available for Hong Kong
and Hungary. One advantage of excluding Hong Kong and Hungary is that they fall into the category of countries with
high financial integration. Therefore omission of financial outliers from the estimation will give us more robust results
regarding the effects of financial globalization.

17
All GMM-IV and 3SLS estimation results are subject to outlier control tests and results are also robust to alternative
output synchronization measures using Hodrick Prescott filter and first differencing.

29

0.20. Total effect of financial globalization is not significant. One standard deviation increase in
structural similarity increases the average correlations from 0.11 to about 0.16.
Indirect effects of each variable are calculated using the coefficient estimates of the
system.

18

Most interesting finding in this table is that although total effect of financial

globalization is very small and statistically insignificant, financial integration effects output
correlations mainly through its impact on bilateral trade integration and intra-industry trade. The
effect of one standard deviation increase in combined gross private flows to GDP ratios of two
countries leads to an increase in average output correlations by about 0.058 in Model I and 0.063
in Model III. Similarly financial globalization leads to a convergence in economic structures that
in turn increases trade integration. The effect of this relationship is an increase in average output
correlations by 0.004 and 0.007 in first two models and Model III respectively. Furthermore
financial globalization has statistically significant indirect effects operating through structure.
Impact on structural similarity increases average output correlations by around 0.02 and effects
through trade and structure increases average correlations by 0.006 in Model I and 0.007 in
Model III although this result is not robust in Model II. Finally specialization effects are observed
however the negative impact on average correlation is very small.
In conclusion, findings of 3SLS estimation confirm the previous results that trade
integration especially in the form of intra-industry trade is the main driving force behind output
synchronization followed by structural similarity. However macroeconomic variables cease to
have any significant effect when direct and indirect effects of linkages are controlled for. Oil
price shocks increase bilateral output co-movements for country pairs with similar fuel import
dependencies. In contrast to GMM-IV results, although coefficient estimates show positive
impact from financial globalization, total effect is not statistically significant. However financial
globalization boosts trade integration and converges economic structures and therefore indirectly
effects output synchronization.

18

For example, total effect of Tij on Yij is given by 2 coefficient in the first equation. However this coefficient
incorporates both the direct and the indirect effects of trade measure. One standard deviation increase in trade measure
increases financial globalization through third equation so effect of trade through financial globalization is given by 2 *
3. Indirect impact of trade through structure equation is given by 2* 5. Furthermore trade will impact Fij which in
return leads to an effect on Sij and ultimately on output correlations. This effect is given by 2* 3* 5. Finally trade
effect operating through Sij which in turn changes Fij is given by 2* 3* 3.

30

VI. Conclusion
Over the last decades, there has been resurgence in the interest for globalization and how
economic integration affects the co-movement of business cycles across countries. In this respect,
this study looks at the multiple channels of business cycle synchronization in a unified framework
and introduces new variables such as trade intensity, intra-industry trade, trade partner similarity,
free trade area membership, economic similarity, global financial integration and macroeconomic
policy similarity measures as well as global oil shocks to explain linkages behind synchronization
of 47 countries including 27 emerging markets.
First part of the paper looks at the regional evolution of major economic linkages and
bilateral contemporaneous correlations of cyclical components of real GDP, investment and
consumption for oil shock, debt crisis and globalization periods. Results show that bilateral
correlations are on the average unchanged for all countries but there are significant variation
among income and regional groups within which correlations have either increased or decreased
over time. Regional cyclical clusters in European Union and among Japan, Korea, Hong Kong
and ASEAN countries have become more evident from oil shock period to globalization in
comparison to Latin America and G-7.
Second part of the paper conducts a GMM-IV and simultaneous equations estimations on
output synchronization for 1970-2003. Results show that bilateral trade intensity, intra-industry
trade and similarity in economic structures are the most important determinants of output
correlations. There are no statistically significant effects from trade partner similarity and being
commodity exporter when macroeconomic policy measures are accounted for. Specifically, there
is evidence that similarity in idiosyncratic fiscal shocks increases bilateral output synchronization
while bilateral real exchange rate volatility has no significant effect. On average global financial
integration has a positive but weak if not insignificant effect. However the relationship is nonlinear and synchronization increases for country pairs with higher degrees of financial openness.
Simultaneous equations estimation shows that there is a strong positive feedback from financial
openness to trade integration. Oil price shocks increase synchronization for pairs with similar oil
import dependencies.
Although regional economic integration is an integral part of globalization, formation of
free trade areas is no guarantee for higher synchronization if member countries have low degrees
of trade and financial integration, diverse macroeconomic fundamentals as well as lack of policy
coordination. For long-run feasibility of monetary unions, trade integration especially in the form
of intra-industry trade seems to be the main determining factor.

31

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36

Table 1 Countries Included in the Study

Americas
Emerging Market
Developed
Argentina C,F
Canada
F
Bolivia C,F
United States
Brazil C
Chile C
Colombia C,F
Mexico
C,F
Paraguay C
Peru C,F
Uruguay C
Venezuela F

Asia
Emerging Market
China F
Hong Kong
India
Indonesia C, F
Korea
Malaysia C
Philippines C
Singapore
Thailand C

Developed
Australia C,F
Japan
New Zealand C

Europe
Emerging Market
Developed
Hungary
Austria
Poland
Belgium
Romania
Denmark F
Turkey C
England F
Finland
France
Germany
Greece C
Italy
Netherlands
Norway F
Portugal
Spain
Sweden
Switzerland

Middle East - Africa

Emerging Market
Egypt C,F
Israel
Morocco C
S. Africa C,F

Notes: C and F denote a commodity exporter and fuel exporter respectively in 1970-79 period.
Emerging markets countries are classified according to Morgan Stanley Capital International definition.
Hong Kong and Singapore are also regarded as emerging markets.

37

Figure 1 Band Pass Filter Output, Investment and Consumption Correlations for 1970-79
OUTPUT CORRELATIONS
1970-79
EGY
ISR
MOR
TUR
HUN
POL
ROM
NOR
SWISS
AUT
BEL
DEN
NLD
FIN
SWE
GRC
POR
SPA
FRA
ITA
GER
UK
USA
CAN
MEX
CHL
ARG
BRA
PAR
URY
BOL
COL
PER
VEN
AUS
NZL
CHN
IND
JAP
KOR
HGK
INDO
MYS
PHL
SGP
THA
ZAF

EGY

ISR

MOR

TUR

1
-0.609
1
0.647 -0.8162**
1
0.709* -0.9135** 0.9111**
1
0.5295 -0.2254 -0.0224 0.0494
0.7791** -0.3836 0.5006
0.4661
0.6645 -0.4425 0.7577** 0.6222
0.5735 -0.6114 0.9016** 0.7908**
-0.8895** 0.4625 -0.6748* -0.6692
-0.6641 0.0035
0.0045 -0.1887
-0.766** 0.2412 -0.2983 -0.2205
-0.3057 -0.108
0.1686
0.1166
-0.6212
0.354
-0.5737 -0.5012
-0.7385* 0.8493** -0.6958* -0.8224**
-0.3692 0.7505* -0.3285 -0.4883
0.0397 -0.0704
0.046
0.0806
-0.7443* 0.1539 -0.3263 -0.3253
-0.7658** 0.1851 -0.5458 -0.3901
-0.6645 0.2693 -0.3469 -0.3665
-0.7213* 0.331
-0.2208 -0.3069
-0.4843 0.1001 -0.0855 -0.1623
-0.4243 0.2797 -0.3152 -0.359
-0.2597 0.0152
-0.124 -0.1082
-0.6577 0.2747
-0.291 -0.3185
-0.675* 0.9441** -0.7483* -0.8184**
-0.4545 0.1742 -0.2768 -0.3242
-0.4794 0.2707 -0.1079 -0.4428
-0.806** 0.2167 -0.1294 -0.2125
-0.2545 0.5888 -0.4918 -0.6594
0.4904
0.1256
0.3866
0.2101
0.7237* -0.7199* 0.5899
0.6322
-0.4803 0.6853* -0.6353 -0.6366
-0.379
0.4546 -0.1992 -0.3394
0.6729* -0.835** 0.8561** 0.8167**
-0.3237 0.4111
-0.421 -0.2964
-0.767** 0.5333 -0.5636 -0.4835
-0.2158 0.7853** -0.7935** -0.8076**
0.6325 -0.5762 0.1538
0.4445
-0.435
0.262
-0.3434 -0.3576
0.1833 -0.1902 0.2421
0.1665
-0.4423 -0.1829 0.0492
0.05
-0.7412* 0.2647 -0.6775* -0.5223
-0.7626** 0.1418 -0.2251 -0.2452
-0.1025 -0.3946 0.3735
0.3818
-0.8966** 0.5176 -0.7004* -0.6629
0.0627 -0.2166 -0.009
0.0969
-0.5429
0.558
-0.4625 -0.4334

HUN

POL

ROM

NOR

SWISS

AUT

BEL

DEN

NLD

FIN

SWE

GRC

POR

SPA

FRA

ITA

GER

UK

USA

CAN

MEX

CHL

ARG

BRA

PAR

URY

BOL

COL

PER

VEN

AUS

NZL

CHN

IND

JAP

KOR

HGK

INDO

MYS

PHL

SGP

THA

ZAF

EUROPE
1
0.698*
0.2706
-0.2616
-0.1294
-0.298
-0.5739
-0.2722
0.056
-0.5489
-0.6328
-0.0293
-0.2427
-0.1722
-0.1012
-0.3975
-0.1518
0.0345
0.1501
-0.2688
-0.498
0.263
-0.0142
-0.853**
0.4635
-0.1602
0.4777
0.0937
-0.5382
0.4077
-0.2923
-0.6643
0.2818
0.5752
-0.1142
0.4423
-0.1873
-0.0153
-0.3715
-0.3327
-0.3134
0.491
-0.5982

1
0.8447**
0.2875
-0.5262
-0.3232
-0.518
0.0016
-0.2184
-0.7502*
-0.4045
0.0639
-0.4105
-0.5797
-0.1563
-0.2333
-0.0483
-0.0199
0.1457
-0.2338
-0.5855
0.1517
-0.1181
-0.7527*
0.3009
0.3899
0.5373
0.0421
-0.4846
0.7556**
-0.2608
-0.8084**
-0.091
0.2602
-0.2529
0.6614
-0.1576
-0.5525
-0.392
-0.0825
-0.6511
0.4338
-0.6529

1
0.658
-0.58
-0.1234
-0.3323
0.0609
-0.4558
-0.6744*
-0.1568
-0.1364
-0.4307
-0.6088
-0.2036
-0.0405
-0.0674
-0.2218
-0.062
-0.2439
-0.5541
0.0334
0.0307
-0.4091
0.0642
0.5915
0.3268
-0.1527
-0.13
0.7938**
-0.426
-0.5928
-0.4528
-0.0468
-0.4565
0.4919
-0.1483
-0.7359*
-0.2834
-0.0073
-0.7348*
0.1165
-0.3956

1
-0.7566**
-0.154
-0.3319
-0.1078
-0.8182**
-0.4282
0.0357
-0.1896
-0.549
-0.6208
-0.589
-0.3136
-0.372
-0.5945
-0.4838
-0.5075
-0.4987
-0.566
-0.1276
-0.0538
-0.6154
0.6074
0.3251
-0.7432*
0.1926
0.5751
-0.4814
-0.296
-0.7244*
0.0613
-0.5543
-0.1377
-0.2608
-0.8055**
-0.4023
0.1259
-0.7724**
-0.4244
-0.0914

1
0.6874*
0.722*
0.3209
0.7952**
0.4463
-0.0087
-0.0534
0.8254**
0.8977**
0.8051**
0.7298*
0.5628
0.5267
0.4496
0.7031*
0.4175
0.7387*
0.4957
0.5623
0.4497
-0.7382*
-0.5771
0.5954
0.0982
-0.4645
0.2254
0.5687
0.2286
-0.4144
0.4339
0.0776
0.5412
0.9066**
0.8084**
0.0575
0.8974**
0.2704
0.2982

1
0.5916
0.6144
0.5013
0.1694
-0.1341
0.0651
0.8016**
0.55
0.724*
0.7439*
0.7145*
0.4884
0.4774
0.6866*
0.0219
0.6583
0.7359*
0.7115*
0.2256
-0.4997
-0.2189
0.197
0.0286
0.0772
-0.0504
0.197
-0.2983
-0.5931
0.3904
0.3048
0.7526*
0.4922
0.8431**
0.455
0.585
0.2404
-0.0456

1
0.5868
0.6306
0.2782
0.1363
0.0811
0.7813**
0.7845**
0.7711**
0.8752**
0.6259
0.4324
0.4345
0.7814**
0.363
0.5298
0.0914
0.8101**
-0.0113
-0.4669
-0.5733
0.4807
0.1196
-0.297
0.4343
0.6909*
-0.2089
-0.5105
0.3519
0.0643
0.6558
0.6464
0.8911**
0.4023
0.7494*
0.211
0.4098

1
0.6498
-0.0781
-0.1945
0.717*
0.7743**
0.2421
0.7753**
0.6592
0.945**
0.8167**
0.8687**
0.8764**
-0.009
0.5635
0.0831
0.5265
0.1037
-0.2656
0.1828
0.4104
-0.5198
0.27
0.5659
-0.1148
-0.226
-0.4348
0.7384*
0.6849*
0.9243**
0.2743
0.7708**
0.8911**
0.4986
0.6667
-0.4122

1
0.229
-0.1952
0.499
0.8835**
0.6761*
0.9136**
0.6468
0.8216**
0.8907**
0.8592**
0.8902**
0.3203
0.791**
0.1515
0.3547
0.5049
-0.6728*
-0.1612
0.7831**
-0.4396
-0.2507
0.6393
0.1858
0.3556
-0.2694
0.7986**
0.4935
0.7497*
0.8115**
0.7832**
0.4072
0.8759**
0.7183*
-0.1512

1
0.7794**
-0.0191
0.2297
0.2322
0.1501
0.239
0.0618
0.1781
-0.116
0.2305
0.9306**
-0.0819
0.3132
0.5208
0.2195
0.0274
-0.6559
0.326
0.5754
-0.906**
0.3701
0.6548
0.5807
-0.5712
0.327
-0.4748
-0.0893
0.2981
0.1965
-0.1842
0.5847
-0.4569
0.6329

1
-0.1924
-0.1992
-0.1863
-0.1399
0.1644
-0.1767
-0.1394
-0.3848
-0.0349
0.8343**
-0.3209
0.1186
0.3443
0.0862
0.5863
-0.6695*
0.2153
0.744*
-0.6733*
0.2295
0.5535
0.3603
-0.6403
-0.0722
-0.464
-0.3968
-0.2461
-0.0986
-0.3123
0.1046
-0.6578
0.7121*

1
0.4207
-0.1277
0.3575
0.0454
0.6276
0.7549**
0.7482*
0.5362
0.042
0.1191
-0.3154
0.0983
0.0142
-0.1108
0.5511
0.2659
-0.7462*
0.1267
0.7731**
-0.3903
0.1881
0.0003
0.8591**
0.5315
0.5941
0.094
0.2568
0.7868**
0.312
0.6235
-0.6095

1
0.7526*
0.928**
0.7723**
0.8852**
0.7947**
0.7833**
0.9312**
0.2086
0.7409*
0.3253
0.6813*
0.2479
-0.7212*
-0.1867
0.5192
-0.2847
-0.1433
0.4701
0.2902
-0.015
-0.4149
0.7403*
0.3867
0.9129**
0.7943**
0.9581**
0.6066
0.885**
0.5566
-0.0817

1
0.6696*
0.6119
0.4017
0.3088
0.3235
0.5681
0.207
0.5749
0.1919
0.5539
0.0854
-0.8548**
-0.5029
0.363
0.0584
-0.3782
0.1731
0.6504
-0.0345
-0.1208
0.2629
-0.0887
0.5214
0.9399**
0.7596**
0.1066
0.7965**
0.2357
0.3573

1
0.8793**
0.9184**
0.8396**
0.8396**
0.9627**
0.2402
0.8981**
0.3468
0.527
0.4913
-0.5643
-0.2699
0.7491*
-0.2943
-0.0773
0.47
0.2222
0.0746
-0.5162
0.6612
0.5781
0.8393**
0.6945*
0.9286**
0.4726
0.8041**
0.6592
-0.0971

1
0.7614**
0.5604
0.5429
0.8448**
0.3383
0.7651**
0.4335
0.6985*
0.3643
-0.2999
-0.563
0.6455
0.1101
-0.1259
0.2876
0.4607
-0.13
-0.7555**
0.35
0.3649
0.6635
0.4916
0.9018**
0.3272
0.6629
0.311
0.2382

1
0.9194**
0.9275**
0.9613**
0.1246
0.7626**
0.283
0.5151
0.3723
-0.4052
0.0251
0.6063
-0.4686
0.118
0.5468
-0.0359
-0.0159
-0.5147
0.7959**
0.71*
0.9266**
0.4697
0.8572**
0.7321
0.6717
0.714
-0.3515

1
0.9516**
0.892**
0.2646
0.694*
0.176
0.2971
0.5233
-0.3871
0.0983
0.7233*
-0.5748
-0.0501
0.7029*
-0.1235
0.3419
-0.3806
0.9239**
0.6971*
0.7852**
0.4946
0.6774*
0.6054
0.7025*
0.7633**
-0.4167

1
0.866**
-0.0082
0.7431*
0.0677
0.2083
0.4168
-0.4578
0.2522
0.6316
-0.734*
0.1998
0.6099
-0.2487
0.1238
-0.2149
0.8322**
0.815**
0.86**
0.4713
0.6857*
0.6902*
0.5819
0.9056**
-0.5611

HUN

POL

ROM

NOR

SWISS

AUT

BEL

DEN

NLD

FIN

SWE

GRC

POR

SPA

FRA

ITA

GER

UK

USA

EUROPEAN UNION

G-7

NAFTA

AMERICAS

1
0.3187
1
0.7595** 0.0111
1
0.2372
0.1358
0.4869
0.6215
0.4278
0.2037
0.3639
0.3249 0.6895*
-0.4653
0.1315 -0.5336
-0.2034 -0.7149* -0.1998
0.7057*
0.5634 0.7172*
-0.3193
0.4938 -0.3179
-0.1155 -0.8998** 0.1266
0.6347
0.5451
0.1408
0.2201
0.658
0.0083
0.0713
0.6593
0.0796
-0.5625
-0.6004 -0.3808
0.7825**
0.337
0.4103
0.547
-0.3276 0.6915*
0.8814** -0.0996 0.6611
0.6124
0.2624
0.5936
0.9198** 0.2054 0.7497*
0.6325
-0.2026 0.2039
0.8162** 0.5757
0.5716
0.6199
-0.314 0.7054*
-0.1109
0.6426 -0.2238

MERCOSUR
1
0.3067
1
0.5527 -0.2091
1
-0.1313 -0.2876 -0.0486
1
ANDEAN
-0.3313 -0.4974 -0.2419 0.0183
1
0.1524
0.1236 0.7685** -0.1637
-0.4214
1
0.3472
0.3456 -0.0936
0.335 -0.7808** -0.1599
1
-0.0369 -0.3569 -0.141
0.1078
0.7046* -0.3514 -0.5355
-0.421
0.2987
0.0867 -0.1117
-0.0299
0.5949 -0.3703
0.0645
0.6675 -0.1454 -0.2284 -0.8812** 0.2099 0.6853*
0.0454 -0.2778 0.6398
0.0333
-0.2064
0.581
-0.0091
-0.6113 -0.6537 -0.4067 -0.2276
0.5961
-0.4846 -0.4421
0.0408
0.3667
0.2824 -0.3988
0.1809
0.5197 -0.5411
0.1434 -0.1831 0.5237 -0.0861
0.4306
0.486 -0.7315*
0.1783
0.5758
0.0755 -0.6004
0.1491
0.3379 -0.5223
0.1721
0.4323
0.2235 -0.9138** -0.3438
0.4544 -0.1364
0.3609 0.7707** 0.1971
-0.611
-0.3365
0.505
-0.1197
-0.1476 0.4818 -0.2936 -0.2581
0.4469
0.0112 -0.5796
0.2556
0.6622
0.3074 -0.6709* -0.4466
0.6218 -0.0437
-0.101 -0.1531 0.3875 -0.4694
0.4425
0.5137 -0.8869**
0.0599
0.444
-0.1491 0.0953 -0.8971** 0.0647 0.8798**

1
-0.401
1
-0.7666** 0.183
1
-0.6421
0.4317
0.0572
0.2835
-0.2001 -0.3829
-0.2022 0.7923** -0.0643
0.604
0.2231 -0.6246
0.2208
0.4367 -0.0136
-0.4356
0.3276
0.4954
-0.0994
0.3721
0.4006
0.3536
0.5057
-0.207
-0.5789
0.5929
0.5565
0.4248
0.4102 -0.4597
-0.7409* -0.0347 0.9201**

ASIA
1
-0.0778
0.3817
-0.0209
-0.2667
0.2163
-0.1807
-0.3967
0.3372
0.0594
0.0905

1
-0.2612
-0.1526
-0.2913
-0.0395
-0.5433
-0.1387
-0.4191
0.134
-0.346

IND

1
0.4512
1
0.7256* 0.5832
1
ASEAN
0.4916
0.0091
0.554
1
0.569
0.3523 0.8783** 0.7069*
1
0.6722* 0.4728 0.8431** 0.1491
0.5637
1
0.7239* 0.0693
0.642 0.8789** 0.8125** 0.3173
1
0.5963 0.8689** 0.6919*
0.379
0.4509
0.5263
0.3142
-0.3646 -0.7603** -0.3774 0.1747
0.0633 -0.4892 0.2347

1
-0.7144*

THA

ZAF

INVESTMENT CORRELATIONS
1970-79
EGY
ISR
MOR
TUR
HUN
POL
ROM
NOR
SWISS
AUT
BEL
DEN
NLD
FIN
SWE
GRC
POR
SPA
FRA
ITA
GER
UK
USA
CAN
MEX
CHL
ARG
BRA
PAR
URY
BOL
COL
PER
VEN
AUS
NZL
CHN
IND
JAP
KOR
HGK
INDO
MYS
PHL
SGP
THA
ZAF

EGY

ISR

MOR

TUR

1
0.2999
1
0.2953 -0.6222
1
0.3391 -0.7153* 0.7786**
1
0.4872 -0.2879 0.2806
0.5169
0.21
-0.278 -0.1801 0.4414
0.2858
-0.213
0.0024
0.5882
-0.0981 -0.5088 0.8397** 0.4641
-0.3575 0.6233 -0.8642** -0.9509**
-0.7758** -0.2745 -0.0399 -0.3101
-0.7168* -0.0208 -0.4579 -0.3767
-0.4142 0.0227 -0.4439 -0.2078
-0.2866 -0.0133 -0.5191 -0.3938
0.1003
0.357
0.2129 -0.3366
0.0468
0.1693
0.4155 -0.0614
0.195
0.1459 -0.2246 -0.1436
-0.5959
0.083
-0.6371 -0.6806*
-0.6914* 0.2149
-0.518 -0.7536*
-0.6345 0.5208 -0.7717** -0.8653**
-0.5181 0.5467 -0.7363* -0.8592**
-0.2182 0.2432 -0.5275 -0.4336
-0.033
0.6292 -0.7491* -0.5396
-0.389
0.1516 -0.6986* -0.4722
-0.0814 0.4839
0.0127 -0.4258
0.3204 0.8942** -0.4047 -0.5201
-0.2978 0.3094
-0.611 -0.4982
-0.342 -0.6782* 0.5496
0.3956
0.0587
0.734* -0.3172 -0.5108
-0.8173** 0.1447 -0.6206 -0.6882*
0.4871 -0.4004 0.6464 0.8837**
0.6191 -0.1944 0.1729
0.6192
-0.7231* 0.081
-0.5677 -0.4024
-0.1212
0.406
-0.0613 -0.4745
0.0097 -0.7868** 0.4347
0.6277
-0.0499 0.2185 -0.3729 -0.4269
-0.2895 0.4634 -0.3379 -0.6577
0.7394* 0.4013 -0.0883 0.1151
-0.0425 -0.8033** 0.6949* 0.6255
-0.1181 0.5201 -0.6877* -0.6796*
-0.0287 -0.0028 -0.5142 -0.0349
-0.5152 -0.131
-0.307 -0.4076
-0.4268 0.0375 -0.2499 -0.5524
-0.6793* 0.2985 -0.5535 -0.7539*
0.5656 -0.2639 0.7793** 0.7966**
-0.4535 0.5855 -0.7393* -0.8068**
-0.428 -0.3693 -0.2881
-0.09
0.1773
0.2062
0.3685 -0.0363

CAN

MEX

CHL

ARG

BRA

PAR

URY

BOL

COL

PER

VEN

AUS

NZL

CHN

1
0.2556
-0.7211*
-0.3302
0.8564**
-0.0365
0.3246
0.3813
-0.2362
-0.6269
0.1386
-0.7656**
0.6211
-0.4983

1
0.1166
-0.3095
0.2461
0.8085**
0.1174
0.5887
0.2339
-0.1099
-0.4583
0.1218
0.3959
-0.1538

1
0.0632
-0.4155
0.0312
-0.5986
-0.1886
0.7512*
0.6994*
-0.2885
0.8530**
-0.4917
0.6857*

1
-0.4724
-0.2815
0.0776
-0.7184*
-0.0825
-0.1959
0.3007
0.0504
-0.5001
0.1824

PER

VEN

AUS

NZL

CHN

1
0.3509
0.7172*
-0.114
-0.1663
-0.5088
-0.4287
0.0691
-0.8136**
0.2813
-0.2466
-0.1523
-0.4587
0.2442
0.2454

1
0.5788
-0.4741
-0.6654
0.4111
-0.7206*
-0.1235
-0.6896*
0.3972
-0.8624**
-0.7497*
-0.1696
-0.568
-0.0792

1
-0.1173
-0.5712
0.0743
-0.8502**
-0.5404
-0.8002**
0.6541
-0.2
-0.2216
0.0945
-0.3925
0.2003

JAP

KOR

HGK

INDO

MYS

PHL

SGP

EUROPE
1
0.5728
0.375
-0.2202
-0.3055
-0.2086
-0.4954
-0.3361
0.2396
-0.3871
-0.5744
-0.0299
-0.3517
-0.606
-0.7538*
-0.2984
-0.2176
-0.2013
-0.0722
-0.6271
-0.359
0.2527
0.2413
-0.6432
-0.7404*
0.6324
0.8104**
-0.5738
-0.4144
0.3349
-0.4997
-0.6275
0.5307
0.015
-0.3963
0.4689
-0.2045
-0.2953
-0.3595
0.2305
-0.5778
0.1716
-0.4177

1
0.8148**
1
-0.5509
-0.23
-0.1958 -0.4824
-0.4565 -0.4509
-0.0223 -0.2549
0.173
0.4052
0.2843 -0.0042
-0.8084** -0.8146**
-0.8215** -0.3786
0.1663
0.2816
-0.0545 -0.3324
-0.4272 -0.7086*
-0.3781 -0.3686
-0.3487 -0.4389
0.0573
0.1738
0.1236
0.2887
0.2737
0.1939
-0.8032** -0.6562
-0.3341 -0.236
0.1286 -0.2138
-0.1733 -0.0222
-0.4983 -0.3482
-0.2801 -0.3079
0.3962
0.6076
0.7926** 0.8008**
0.0241
-0.085
-0.6691 -0.7815**
0.4775
0.4373
-0.0496 -0.1001
-0.5667 -0.7323*
0.4002
0.2102
0.0603
0.1249
-0.0626 -0.0398
0.7273*
0.592
-0.1214 -0.1933
-0.3467 -0.7949**
-0.4171 -0.649
0.0458
0.3602
-0.2853 -0.4562
0.3729
0.1991
-0.6302 -0.5361

1
-0.6601
0.2983
-0.2198
-0.1602
-0.5321
0.3588
0.742*
-0.1942
-0.3907
-0.1839
-0.3096
-0.4277
-0.3082
-0.5716
-0.5462
0.3095
-0.3074
-0.6512
0.62
-0.0691
-0.1492
0.3048
-0.2858
-0.2707
0.111
0.2508
-0.1969
-0.0787
-0.5135
0.6505
-0.4532
-0.6833*
-0.0614
-0.1314
-0.2571
0.5671
-0.4504
-0.2593
0.4708

EUROPEAN UNION
1
0.2838
1
0.4411
0.1882
0.1798
0.3542
0.5554
0.4437
0.1593 -0.0117
-0.2459 0.1772
0.1067
0.0132
0.7393* 0.5147
0.7464* 0.4283
0.7891** 0.4147
0.8658** 0.5655
0.4093
0.3531
0.5214
0.0576
0.564
0.4018
0.2136
0.0226
0.4014 -0.4355
0.6846* 0.2459
-0.4094 0.7174*
0.3381 -0.2871
0.6383
0.5853
-0.8361** -0.374
-0.4582 -0.4907
0.4424
0.1744
0.3707
0.0299
-0.5406 0.0475
0.353
-0.054
0.5686
0.0303
0.0027 -0.7910**
-0.6664 0.0867
0.6284
0.1542
0.2463
0.0468
0.4132 0.6954*
0.596
0.2768
0.7822** 0.5725
-0.8909** -0.5181
0.7970** 0.1092
0.233
0.5084
-0.1501 -0.2595

1
-0.0089
-0.0594
0.1374
-0.2689
-0.5451
0.366
0.8069**
0.5979
0.3855
-0.2192
-0.1145
0.0426
0.3248
0.1509
0.4493
-0.3137
0.3678
0.6011
-0.4472
-0.5988
0.9582**
0.4757
-0.3382
-0.0149
0.6706*
-0.1549
-0.2475
-0.0796
-0.1495
-0.0455
0.6079
0.7004*
-0.4049
0.7831**
-0.0459
0.1856

1
0.4981
-0.654
0.0187
0.6798*
0.5136
-0.0263
0.4885
0.2968
0.8854**
0.7491*
0.8231**
-0.3924
-0.2589
-0.1362
0.2073
-0.2056
0.6355
-0.2909
0.0432
0.2154
-0.6205
0.2751
0.4798
-0.372
-0.6059
0.0619
0.704*
0.5727
0.6789*
-0.3718
-0.0339
-0.4227
-0.0056
0.6605
-0.667

BEL

DEN

1
-0.53
1
-0.5182 0.5816
0.5811 -0.4738
0.7923** -0.1874
0.1813
0.4291
0.2597
0.1441
0.4614
0.1216
0.7178* -0.5079
0.4805 -0.4092
0.8766** -0.6348
-0.6242 0.8969**
-0.4241 0.5692
0.4025 -0.0218
0.204
-0.2379
-0.5627 0.6684
0.4119 -0.0564
-0.4688 -0.2578
0.1619 -0.6725*
-0.0498 -0.0011
-0.4589 0.9126**
0.3091
-0.611
0.3932
-0.081
-0.287 0.7730**
-0.2379
0.121
-0.0749 -0.175
0.6235 -0.2258
0.7693** -0.8736**
0.8153** -0.3405
0.1973
0.519
0.244
0.3534
-0.8148** 0.1487
0.0124
0.3843
0.8957** -0.7183*
-0.8203** 0.9045**

1
0.06
1
-0.2443 0.4442
1
G-7
-0.0275 -0.3008 0.6551
1
0.1328
0.0827
0.6595 0.7674**
1
-0.0607 -0.0189 0.5691
0.6405 0.8166**
1
0.0102 0.8628** 0.6624
0.013
0.4832
0.4235
1
-0.0601 0.6263
0.4016 -0.0091 0.5785
0.5684 0.8317**
1
-0.3571 0.6787* 0.7842** 0.1776
0.5228
0.5456 0.9104** 0.7773**
1
0.6484 -0.5061 -0.194
0.4874
0.4134
0.2859 -0.3885 -0.1634 -0.5206
0.2639 -0.2269 -0.217
0.2319
0.3992
0.3427 -0.1637 0.3069 -0.2489
-0.5981 -0.3816 0.2826
0.4604
0.3652 0.7311*
-0.04
0.214
0.2889
0.2069
0.0713 -0.0109 -0.2515 -0.2806 -0.0749
0.133
-0.2408 0.0857
0.4387 -0.3372 -0.1574 0.4147
0.5268
0.3121 -0.2217 0.1639 -0.3266
0.0799
0.2127 0.8190** 0.748* 0.9022** 0.6473
0.5765
0.4416
0.6314
-0.0624 -0.2712 -0.8723** -0.8265** -0.8116** -0.6366 -0.4788 -0.3546 -0.5106
-0.4929 0.3112 -0.3928 -0.8489** -0.6999* -0.4926 0.0532
0.1135
0.0861
-0.2192 -0.4152 0.3592 0.7196* 0.7023* 0.4459 -0.0428
0.118
0.1784
0.3212 -0.6695* -0.077
0.6488
0.3472
0.342
-0.5457 -0.3335 -0.5248
-0.2147 0.4544
0.1101 -0.4476 -0.5356 -0.6295 0.2037 -0.2409 0.1902
0.1208
0.74*
0.6698* 0.2564
0.3949
0.0291
0.6339
0.3932
0.5012
0.2158 -0.4929 0.2211 0.8355** 0.5978
0.4371 -0.3181 -0.1411 -0.2648
-0.4167 -0.2646 -0.4856 -0.2905 -0.3994 -0.1988 -0.4701 -0.0731 -0.3731
0.2091
0.2314 -0.0345 -0.2927 -0.496 -0.7267* -0.0505 -0.5253 -0.1759
0.0445 0.8027** 0.7298* 0.2389
0.6305
0.4859 0.9038** 0.8248** 0.8081**
-0.708* 0.5176
0.3717 -0.2531 0.0335
0.2272
0.6173
0.6153 0.7962**
-0.0105 0.6628 0.8484** 0.2868
0.4225
0.4104 0.8170** 0.4121 0.8078**
-0.1435 -0.3234 0.5605 0.8680** 0.3847
0.3543
-0.212
-0.34
-0.0317
-0.1019 -0.4169 0.5111 0.8748** 0.7401* 0.8620** 0.0155
0.117
0.226
0.3566 -0.2994 -0.9388** -0.6888* -0.7178* -0.7776** -0.6055 -0.4943 -0.7911**
-0.079 -0.3469 0.4163 0.8473** 0.8336** 0.7237* -0.0002 0.2752
0.1553
-0.4389 0.6057 0.7215* 0.0457
0.1408
0.2036 0.7141*
0.346 0.8400**
0.5945 -0.5772 -0.4444 0.2491 -0.0152 -0.1877 -0.6851* -0.5342 -0.8317**

NAFTA
1
0.7204*
0.02
-0.313
0.8745**
0.1603
-0.2789
-0.7647**
0.2919
0.9018**
-0.7819**
-0.1091
0.8257**
0.0096
-0.3492
-0.133
-0.8215**
-0.3723
0.3538
0.4556
0.1268
0.5829
-0.7647**
0.8721**

AMERICAS
1
0.2252
1
-0.7612** -0.1815
0.9240** 0.081
-0.0089 0.1833
-0.2082 -0.2356
-0.2933 -0.0893
0.2127
0.4094
0.6417
0.3051
-0.8870** -0.5243
-0.006
-0.379
0.6368
0.3061
0.508
0.303
-0.7456* -0.7653**
0.1541
0.0061
-0.3311 0.3746
-0.4993 0.0047
0.0738
0.3828
0.2742 0.7538*
0.0433 -0.5769
0.6311
0.594
-0.7206* 0.1136
0.5535 -0.2443

MERCOSUR
1
-0.6728*
-0.0147
0.2841
0.0561
-0.3338
-0.3727
0.5058
-0.2992
-0.5348
-0.6404
0.5205
-0.2365
0.057
0.4318
-0.2185
-0.0874
0.087
-0.5834
0.4392
-0.3114

1
0.1964
1
-0.3068 -0.8218**
-0.5649 -0.6709*
0.4208 0.6794*
0.7487* 0.1076
-0.8498** -0.1422
0.0511
0.5259
0.7852** 0.4068
0.2344 -0.6832*
-0.5647 -0.1166
0.0939
0.6264
-0.553
0.1048
-0.4495 0.6706*
0.1929
0.4183
0.36
0.625
0.0608 -0.7606**
0.7124* 0.6179
-0.7472* 0.4421
0.7084* -0.1907

1
0.6896*
-0.4275
-0.3428
0.2682
-0.6946*
-0.6134
0.366
0.2152
-0.7137*
0.0188
-0.6139
-0.7008*
-0.6326
0.8359**
-0.6742*
-0.3019
-0.0021

ANDEAN
1
-0.5409
1
-0.7397* 0.3468
1
0.482
-0.3689 -0.7749**
-0.2054
0.029
-0.1931
-0.8287** 0.5771 0.9202**
0.4913
-0.2081 0.1812
0.11
-0.3244 -0.4165
-0.1362
0.0597
-0.247
0.6208
-0.0314 -0.7386*
-0.2037
-0.0095 -0.385
-0.6733* 0.4023
0.6445
-0.7125* 0.6474
0.6272
0.3629
-0.405 -0.0406
-0.6751* 0.7921** 0.6755*
0.2079
-0.0114 -0.6827*
-0.5463
0.0774 0.8202**

ASIA

1
-0.2105
1
-0.1999 0.4345
1
0.2338 0.6984* 0.4206
-0.0788 0.0448 -0.3238
-0.574
0.1359 -0.0852
0.3462 -0.6841* -0.4519
-0.6883* 0.275
-0.1433
0.2817
0.4998 0.7372*
-0.0192 -0.4266 -0.9560**

1
ASEAN
0.2038
1
0.2254 0.6835*
1
-0.7337*
-0.56 -0.6873*
1
-0.0263 0.5923 0.8305** -0.5641
1
0.8605** 0.0299
0.036
-0.6318 -0.215
1
-0.5983 0.3166
0.1049
0.4611
0.2727 -0.8769**

CONSUMPTION CORRELATIONS
1970-79
EGY
ISR
MOR
TUR
HUN
POL
ROM
NOR
SWISS
AUT
BEL
DEN
NLD
FIN
SWE
GRC
POR
SPA
FRA
ITA
GER
UK
USA
CAN
MEX
CHL
ARG
BRA
PAR
URY
BOL
COL
PER
VEN
AUS
NZL
CHN
IND
JAP
KOR
HGK
INDO
MYS
PHL
SGP
THA
ZAF

EGY

ISR

MOR

TUR

HUN

POL

ROM

1
-0.3188
1
-0.0865 0.0083
1
-0.0339 -0.4352 -0.5437
1
0.7378* -0.3896 -0.4549 0.2827
1
-0.2727 -0.104 0.6724* -0.2656 -0.7073*
1
0.4146 -0.3689 0.5519 -0.2055 0.4122 -0.1233
1
0.228
-0.598 -0.3162 0.3691
0.0149
0.1366
-0.278
0.4746
0.1802 -0.6553 0.0606
0.5729 -0.4252 -0.3652
-0.0297 0.0675
-0.397
0.2632 -0.2681 0.3543 -0.8481**
0.083
0.2566
-0.239 -0.5399 0.0556
0.0288 -0.3919
-0.5524 0.0571
0.3424 -0.3848 -0.6966* 0.7822** -0.4058
0.1148 -0.1974 0.7246* -0.5366 -0.0455 0.5519
0.5004
-0.474
0.3983 -0.0294 -0.5413 -0.3181
-0.21
-0.1087
0.1723 -0.3337 -0.0825 -0.3282 0.2227 -0.2971 0.2962
-0.3447 0.5566
0.6386 -0.6299 -0.6163 0.6521 -0.1008
0.1913 -0.2705 -0.834** 0.4919
0.5064 -0.7413* -0.1977
-0.0813 -0.1234 -0.7396* 0.3781
0.1729 -0.0962 -0.7197*
-0.2259 0.4612
0.0959 -0.5418 -0.2421 0.3188 -0.3598
0.2622
0.1026 -0.5734 -0.2638 0.2622 -0.2318 -0.483
-0.1662 0.2467
0.3661
-0.62
-0.3892 0.6354 -0.2475
-0.0518 0.7602** 0.0067
-0.628 -0.0581 -0.0699 -0.2231
-0.3517 0.4196
0.1477 -0.4037 -0.3878 0.4785 -0.4435
0.5944 -0.1001 -0.1017 -0.5262 0.5258 -0.1766
0.184
0.0143
0.4621 -0.5129 -0.3152 0.2801 -0.7348* -0.1411
0.5011 -0.0043 -0.2399 -0.0862 0.4773 -0.0203 -0.1388
0.2628
0.0888 -0.7694** 0.3151
0.4039 -0.7720** -0.2533
0.3951 -0.3296 -0.3419 0.0489
0.2925
0.1941 -0.3671
0.0428 -0.2906 -0.6376 0.9442** 0.2354 -0.2009 -0.4337
-0.1558 0.6684 -0.2367 -0.3603 -0.0419 -0.5902 -0.0814
-0.2214 -0.3405 -0.114
0.2971 -0.4644 0.6087 -0.6162
0.2273
0.166
-0.0262 -0.1508 0.3566 -0.0066 0.0193
0.4813 -0.4961 0.0944 -0.1526 0.1865 -0.0541 0.3671
-0.2365 -0.4482 0.5007
0.2865 -0.3381 0.3534
0.3961
0.5919 -0.6547
0.047
0.3991
0.4255 -0.1597 0.5241
0.064
0.3729 -0.6607 0.1174
0.5019 -0.9506** -0.052
-0.2449 0.5941 -0.5658 -0.2677 0.0406
-0.573 -0.4393
-0.3526
0.167
-0.0109 0.6412 -0.2835 0.1066 -0.2183
-0.2311 0.821** 0.0189 -0.6986* -0.3034 0.0389
-0.384
-0.4134 0.1744
0.2986 -0.6187 -0.6838* 0.6454 -0.3978
-0.1669 0.6243 -0.0522 -0.2371 -0.1762 0.1875 -0.4702
0.3078
-0.327 -0.0295 0.3489
0.5945
-0.621 0.7264*
0.6096
0.1521 -0.4207 -0.095 0.6796* -0.4146 -0.0526
0.6149
0.2702 -0.0052 -0.4766 0.5376 -0.2563 0.2404
0.295
0.282
-0.1921 0.4341
0.1845 -0.1017 -0.192
0.2113
0.2916
0.1353 -0.833** -0.133
0.2151 -0.1571
-0.0602 -0.0287 -0.7899** 0.4461
0.3188 -0.7759** -0.2529

NOR

SWISS

AUT

NLD

FIN

SWE

GRC

POR

SPA

1
0.3792
-0.5153
0.3934
-0.6746*
-0.3692
-0.6027
0.062
0.5324
-0.1467
0.8975**
0.0704
0.4645
0.3444
0.0404
-0.397
0.394
-0.1273
0.3579
0.6421
0.4401
-0.1542
-0.3298
-0.354
-0.489
0.3671
0.1104
-0.2003
-0.122
-0.1876
0.9427**

1
0.3982
0.6784*
0.2555
0.1492
0.4209
0.2436
0.1338
0.5576
0.1951
0.7622**
0.5358
-0.2546
0.4843
0.3609
-0.3318
-0.5756
-0.3796
0.1274
0.3295
-0.078
0.1444
0.164
0.4044
-0.491
0.4421
0.0522
0.0867
0.1021
0.2633

FRA

ITA

GER

UK

USA

CAN

MEX

CHL

ARG

BRA

PAR

URY

BOL

COL

IND

JAP

KOR

HGK

INDO

MYS

PHL

SGP

THA

ZAF

1
-0.3812
-0.1265

1
-0.2616

EUROPE

1
-0.0515
0.4945
-0.0789
0.0238
-0.3797
-0.1504
0.3756
-0.5849
0.5294
0.3041
-0.4776
0.2584
-0.2719
-0.6813*
-0.4279
-0.0349
-0.2023
-0.1638
0.3927
0.3781
0.4259
-0.2822
0.7491*
-0.5769
0.6683
0.2767
0.5482
-0.2834
-0.218
-0.1262
-0.5344
0.1481
-0.5605
-0.1207
-0.2512
-0.4733
-0.1792
0.0172
0.3434

EUROPEAN UNION
1
0.4292
0.6451
-0.1859
-0.1308
-0.218
-0.156
-0.1119
0.2927
0.6723
0.4335
0.7518*
0.2036
0.5314
0.322
0.6138
0.4076
0.8497**
0.347
0.6875*
0.2752
0.0406
-0.1031
0.6547
-0.269
-0.9034**
-0.2641
0.4346
0.4275
-0.2467
0.3829
-0.1654
0.5575
-0.2337
0.9387**
0.7012*
0.4072
0.3241
0.1551

1
0.3368
0.3809
-0.281
-0.328
-0.3975
0.0881
0.0593
0.6973*
0.2818
0.4495
0.3176
0.05
0.3941
-0.0504
-0.2297
0.3736
0.095
0.6509
0.5365
-0.3279
0.7918**
0.0854
-0.1864
-0.3056
-0.2164
-0.2958
0.0092
0.2027
0.1429
0.3301
0.4191
-0.7447*
0.1722
-0.116
0.3726
0.1842
-0.0366

1
0.4769
1
0.2634
0.4762
1
0.339
0.2307 -0.1488
0.2084 -0.0795 -0.047
0.3171
0.6509
0.6083
-0.0305 -0.5271 -0.7575**
0.5609
0.2869 -0.2282
0.8107** 0.667
0.5018
0.8875** 0.1892 -0.1132
0.7239* 0.8257** 0.6865*
0.7157* 0.2431
0.2692
0.6785* 0.758**
0.489
0.7783** 0.0515
0.4302
0.4692 -0.2782 -0.3956
0.6508
0.0902
0.3736
-0.0329 -0.6441 -0.8672**
0.6659
0.3342
0.2347
-0.3507 -0.3097 -0.5885
0.1223 -0.3285 -0.4926
0.0672
0.5621
-0.141
0.5167
0.1345
0.5343
-0.1326 -0.2428 -0.0947
-0.8413** -0.0414 0.0087
-0.6391 -0.6184 -0.1814
0.1064 -0.6234 -0.5741
0.5604 -0.0316 -0.4377
-0.6916* -0.1833 -0.3601
0.7362*
0.398
0.1549
0.5911 0.8947** 0.3297
0.5604
0.3839
0.2435
-0.6578 -0.8239** -0.1743
0.5997 -0.2576 0.1232
0.5813 -0.1817 0.4165
-0.2689 -0.4188 -0.2522
0.8347** 0.4421
0.3405
-0.1158 -0.5129 -0.8559**

1
0.6279
0.0772
0.1926
-0.1225
0.1802
0.2858
0.0837
0.3037
0.0547
0.122
0.7217*
-0.4405
0.2322
-0.3713
-0.6034
0.7592**
-0.2176
-0.351
0.1602
-0.1428
-0.4294
0.3967
0.7396*
-0.4816
0.5045
0.4981
-0.125
-0.1121
-0.268
-0.1188
-0.7242*
0.4334
0.375

1
-0.4619
1
0.5045 -0.9124**
-0.1313 -0.186
-0.264 0.7492*
0.3613 -0.1091
-0.1943 0.8124**
-0.2124 0.6445
-0.4331 0.8007**
0.4419
0.0252
0.5104 -0.2309
-0.2988 0.2001
0.38
-0.7502*
-0.0462 -0.0135
-0.4441 -0.5291
0.373
-0.0832
-0.1035 -0.0255
-0.4624 0.4322
0.7772** -0.5141
0.0511 -0.1621
0.2754 -0.6706*
0.2307 -0.4467
0.3169 -0.0621
-0.7825** 0.0475
-0.0973 0.6668
0.2354
0.5533
-0.6596 0.6966*
0.2385 -0.6052
-0.1416 -0.0086
-0.0493 0.2643
-0.8189** 0.0615
0.39
0.4091
0.4366 -0.7996**

G-7
1
0.4823
1
0.9144** 0.3709
1
0.846** 0.4578
0.6394
1
0.9656** 0.3351 0.9178** 0.7302*
1
0.4608
0.74*
0.4413
0.4786
0.2572
0.1483
0.5828 -0.1352 0.4855 -0.0617
0.6169
0.572
0.5273
0.534
0.5512
-0.4816 0.3829 -0.674* -0.1579 -0.5901
0.4589 0.7084* 0.5063
0.1677
0.4424
-0.3796 -0.0615 -0.4683 -0.4651 -0.242
-0.0463 0.2027 -0.2753 0.3852 -0.2002
0.0025
0.1695
0.219
-0.4092 0.1663
0.7195* 0.2766
0.5714
0.6663 0.6748*
-0.5833 0.1124 -0.3516 -0.5327 -0.6751*
-0.6868* -0.8165** -0.4333 -0.806** -0.5397
-0.8796** -0.3482 -0.6958* -0.7961** -0.873**
-0.1148 0.2955 -0.4795 0.2911 -0.2741
0.3401
0.6236
0.0362
0.5783
0.1873
-0.2996 -0.6707* -0.3543 -0.2821 -0.094
0.8264** 0.4977
0.6609 0.9458** 0.7268*
0.585
0.3867 0.7506* 0.2985
0.5955
0.8603** 0.3013 0.6894* 0.827** 0.8789**
-0.7341* -0.4944 -0.8072** -0.4524 -0.7964**
0.4509
0.6191
0.2472
0.5945
0.3085
0.5211
0.4565
0.3931 0.7206* 0.3463
-0.053 -0.2017 -0.1713 0.1165
0.033
0.6134 0.7132* 0.6793* 0.6037
0.4654
-0.4966 0.2598 -0.7142* -0.2794 -0.5711

NAFTA

AMERICAS

1
0.4094
1
0.6904*
0.0116
1
MERCOSUR
0.0253
0.6467 -0.1674
1
0.6165
-0.1198 0.8143** -0.0791
1
-0.434
-0.2886 0.1013
0.3645
0.2455
1
0.0258 0.8615** -0.3644 0.5963 -0.5353 -0.3598
1
-0.2411
-0.4915 -0.0388 -0.0936 0.4769
0.4242 -0.5201
0.5141
-0.0144 0.8806** -0.4168 0.5141 -0.0511 -0.3003
0.2439
0.0715
-0.337
0.3638 -0.0195 -0.2115 0.0884
-0.6793* -0.6055 -0.7614** -0.2294 -0.5524 0.0764 -0.2794
-0.1235
-0.3159 -0.281
0.3049 -0.1321 0.2864
-0.232
0.1396
0.856** -0.0036 0.7355* -0.2541 0.0904 0.7519*
0.2733 0.9353** 0.0357
0.5501 -0.0463 -0.1898 0.8056**
-0.8722** -0.4897 -0.2779 -0.0722 -0.3808 0.6283 -0.1936
0.3748
0.5284
0.3311 -0.1021 0.1008 -0.5217
0.493
0.213
0.0146 -0.0219 -0.371
0.2668 -0.5117 -0.006
0.1906
0.0504
0.655
-0.3446 0.3614 -0.0282 -0.0466
-0.1589
0.0958 -0.3398 0.3115 -0.5372
0.105
0.1671
0.728*
0.3575 0.9012** 0.1755
0.6055
0.0704
0.0052
0.7975** 0.3388 0.7864** -0.0605 0.3891 -0.3536 0.1022
-0.272
-0.2777 0.3627
0.0947
0.075
0.5859 -0.1746
0.7422*
0.3897
0.3737 -0.0641 0.4261 -0.6552 0.2394
-0.1379
0.6299 -0.3447 0.9024** -0.1957 0.3946
0.556

ANDEAN
1
-0.3042
0.1342
0.2189
0.0344
-0.6179
-0.287
0.1443
-0.2299
0.4925
-0.0499
-0.6164
-0.3435
-0.5555
-0.0604
0.0455
-0.0668

1
-0.6356
-0.6666
-0.4818
0.04
0.0352
-0.1086
0.4265
-0.0832
0.7781**
-0.2222
0.7851**
0.7709**
0.3536
0.2006
-0.4807

ASIA
1
0.7696**
1
-0.0926 -0.3452
1
0.2304
0.6685 -0.3096
-0.4685 0.1917 -0.4446
0.0089
0.2692
0.1327
0.4303 -0.1768 0.1352
0.3931
0.298
-0.3277
0.2629
0.2185 -0.4685
0.0766 -0.2284 0.6802*
-0.0942 0.3904 -0.7872**
0.7532* 0.5808 -0.0113

1
0.5236
1
0.7456* 0.2284
1
-0.6023 -0.8176** -0.6208
0.3767
-0.25
0.5445
0.5116
-0.113
0.5166
-0.0461 -0.5754 0.4432
0.6962* 0.7131* 0.3036
-0.2001 -0.3357 -0.4324

ASEAN
1
-0.0772
1
-0.0423 0.8866**
1
0.0476
0.3923
0.2367
-0.6039 0.3461
0.5241
0.3791 -0.0392 -0.3086

38

Figure 2 Band Pass Filter Output, Investment and Consumption Correlations for 1980-89
OUTPUT CORRELATIONS
1980-89
EGY
ISR
MOR
TUR
HUN
POL
ROM
NOR
SWISS
AUT
BEL
DEN
NLD
FIN
SWE
GRC
POR
SPA
FRA
ITA
GER
UK
USA
CAN
MEX
CHL
ARG
BRA
PAR
URY
BOL
COL
PER
VEN
AUS
NZL
CHN
IND
JAP
KOR
HGK
INDO
MYS
PHL
SGP
THA
ZAF

EGY

ISR

1
0.0606
1
0.0647 -0.4343
0.6501** 0.6618**
0.3875 -0.2344
0.2014 -0.4508
0.3545 -0.1948
-0.2021 0.0343
-0.6768** -0.4307
-0.4827 -0.3097
-0.7541** -0.3885
0.3857 -0.2146
-0.8225** -0.3542
-0.2573 -0.5997*
-0.1039 -0.4694
-0.5264 -0.7331**
-0.4311 0.0596
-0.2622 -0.1621
-0.2105 -0.6009
-0.654** -0.2668
-0.663** -0.224
0.3559 -0.2692
-0.0628 -0.3769
-0.3098 -0.2653
-0.7643** 0.019
-0.6217* -0.0121
0.1118
0.5244
-0.2578 -0.1218
-0.8047** -0.0634
-0.3511 0.4614
-0.7833** 0.0631
-0.3502 0.3094
0.08
0.6425**
0.0939 0.7469**
-0.2661 -0.1731
0.7737** -0.2484
0.277
-0.1086
0.0883 -0.3948
-0.6312* -0.5679*
0.7763** 0.2448
-0.0793
0.428
-0.4597 -0.0718
-0.4214 -0.2969
-0.0975 0.0815
-0.3163 -0.1639
-0.4287 -0.3904
-0.5532* -0.2621

MOR
1
-0.3863
-0.1578
0.1884
0.1167
0.0668
0.1182
0.3298
0.3102
0.6108*
-0.2086
0.1447
0.1311
0.5215
0.1305
0.0041
0.3384
0.2338
0.133
0.225
-0.1674
-0.1333
-0.1745
-0.2308
-0.1221
0.3717
-0.0557
-0.1597
-0.309
0.0156
-0.0329
0.1902
-0.3853
-0.0238
0.144
-0.0277
0.3412
-0.1636
-0.3425
-0.4361
-0.2303
-0.0958
-0.3432
-0.0739
-0.1177

TUR

HUN

POL

ROM

NOR

SWISS

AUT

BEL

DEN

NLD

FIN

SWE

GRC

POR

SPA

FRA

ITA

GER

UK

USA

CAN

MEX

CHL

ARG

BRA

PAR

URY

BOL

COL

PER

VEN

AUS

NZL

1
-0.3274
-0.2271
0.0685
-0.35
-0.2466
0.1956
0.4453
-0.3566
-0.3572
0.0535
-0.2411
-0.3155
-0.0848

1
-0.2276
0.4095
0.345
0.3916
0.0376
0.4411
0.3097
0.0481
-0.1655
0.1906
0.2493
0.4845

1
0.3394
0.0639
-0.4321
0.5421
-0.2446
-0.2115
0.0278
-0.3225
-0.0274
-0.247
-0.2709

VEN

AUS

NZL

CHN

IND

JAP

KOR

HGK

INDO

MYS

PHL

SGP

THA

1
0.196
0.1283
0.3309
0.3897
0.2326
0.4955

1
0.6292*
1
0.1424
0.3958
1
0.4774 0.9145** 0.6007*
1
0.2477 0.7267** 0.677** 0.8554**
1
0.3567
0.497
0.1892 0.5581* 0.6503**

HGK

INDO

1
-0.4313
1
-0.2034 0.8183**
1
0.3852 -0.5407 -0.4684
1
-0.0691 0.5444
0.5346 -0.5828*
1
-0.5326
0.264
0.2132 -0.5363 0.5945*
-0.5033 0.1268
0.1039
0.0132
0.0256
-0.5512* 0.2232
0.11
0.221
0.1798
-0.371
-0.1291 -0.1878 0.3634
-0.148
-0.2842 0.3089
0.1802
0.3711
0.0266
-0.4982 0.5018 0.5514* -0.1938 0.1833

1
0.3451
0.5052
0.0819
0.077
0.3032

ZAF

EUROPE
1
0.1694
-0.0358
0.2602
0.0624
-0.6664**
-0.7321**
-0.712**
0.1552
-0.774**
-0.5449
-0.1764
-0.8056**
-0.4617
-0.2879
-0.6549**
-0.5426
-0.5118
0.106
-0.0266
-0.1633
-0.3944
-0.3466
0.4386
-0.2268
-0.5489
0.0311
-0.3852
-0.0519
0.5201
0.4816
-0.0956
0.4909
0.4008
-0.2878
-0.7249**
0.7043**
0.3131
-0.3317
-0.3799
-0.2703
-0.2399
-0.5589
-0.402

1
0.471
0.4384
-0.4713
-0.2363
-0.4506
-0.0381
-0.1631
-0.0739
0.6579**
0.4735
-0.174
0.2981
0.6262
0.5149
0.053
-0.6147*
0.6383**
0.2215
0.2869
-0.3357
-0.0449
-0.2012
0.0182
-0.0654
-0.027
-0.0807
0.0649
0.0167
-0.2011
0.3296
0.2915
0.2731
0.4548
0.2129
0.475
0.3626
-0.3836
-0.0442
0.3209
0.2675
0.3968
0.2651

1
0.8601**
0.2775
0.1647
0.0092
0.2952
0.5202
-0.1596
0.6234*
0.8584**
0.355
-0.0612
0.5322
0.2975
0.4689
0.0996
0.8889**
0.7201**
0.6434**
-0.51
0.0905
0.1586
0.3872
-0.216
-0.0555
-0.3971
0.1823
-0.2149
-0.3151
0.6562**
0.1091
0.7271**
0.2919
0.3017
0.3711
0.1734
-0.1659
-0.1862
-0.216
-0.058
0.0593
0.0203

HUN

POL

ROM

1
0.188
0.448
0.4269
0.0688
-0.1849
0.0464
0.2172
0.0493
0.3492
0.2854
0.0041
0.4141
0.6004*
0.4128
0.0304
-0.043
0.1311
-0.2184
0.2096
-0.2514
0.1048
0.2152
0.4127
0.0205
0.3412
-0.197
0.0427
0.1848
-0.1032
-0.0073
0.031
-0.1419
0.2327
0.1926
0.0902
0.2215
0.0444
-0.5103
0.2259
-0.3446
-0.1704
-0.3843

1
0.8048**
0.5691*
-0.0522
-0.3764
0.0402
0.5834*
0.3977
0.2235
0.4251
0.1041
-0.3019
0.0312
-0.1237
-0.1019
-0.116
0.8052**
0.417
-0.2796
-0.7518**
-0.4723
0.0998
-0.1892
-0.6812**
-0.4007
-0.2355
0.0245
-0.4736
-0.2371
0.0937
0.1052
0.4866
-0.2432
-0.0407
0.7248**
-0.6026*
-0.8048**
-0.364
-0.1428
-0.137
0.0384
-0.2661

1
0.3838
0.2906
-0.1189
0.399
0.4441
0.4945
0.7028**
0.7802**
0.136
-0.0612
0.4697
0.4051
0.2332
0.0192
0.9030**
0.3773
0.1398
-0.4633
-0.05
-0.0361
0.0844
-0.3429
-0.086
-0.2477
0.1486
-0.4321
-0.3393
0.3686
0.1852
0.1066
0.1444
0.4343
0.3906
-0.3305
-0.4655
-0.2526
0.0262
-0.1931
0.0632
0.0266

1
-0.142
-0.3757
-0.4001
0.19
-0.1056
0.0018
-0.1994
-0.0535
0.284
0.281
-0.0199
-0.2409
-0.3275
0.2035
-0.0439
-0.0312
-0.6294*
-0.3558
0.3826
-0.0417
-0.4039
0.0823
-0.0747
0.406
0.2142
0.2374
-0.0167
0.089
0.1999
0.0679
-0.0736
0.3345
-0.1692
-0.3806
-0.5931*
0.1729
-0.3907
-0.1006
-0.5222

1
0.8093**
0.7906**
-0.0963
0.6072*
0.4144
0.6044*
-0.1658
0.0601
0.2846
0.6437**
0.9375**
0.7580**
0.2879
0.477
0.7432**
0.4213
0.7584**
0.4197
0.4225
0.7068**
0.3703
0.3371
0.4161
0.0753
-0.2623
0.8304**
-0.3602
-0.1037
0.5267
0.6817**
-0.3
0.392
0.236
0.1502
0.0348
-0.1776
0.281
0.4069

1
0.5997*
-0.1741
0.4672
0.0959
0.316
-0.0244
0.0498
0.1507
0.4574
0.7464**
0.6176*
-0.0739
0.3666
0.7776**
0.6605**
0.8387**
0.3714
0.4209
0.8111**
0.3379
0.6344**
0.1767
0.1871
0.0319
0.7334**
-0.3265
-0.0248
0.5054
0.5313
-0.5756*
0.4467
0.3776
0.0957
-0.2425
-0.3341
0.0606
0.323

1
0.166
0.6893**
0.4967
0.7337**
0.0086
0.047
0.3445
0.7010**
0.8369**
0.7018**
0.487
0.2674
0.4219
0.3362
0.5162
0.2445
0.4834
0.4721
0.3451
0.0334
0.3031
-0.047
-0.268
0.5499*
-0.5072
0.117
0.1976
0.6386**
-0.1337
0.3422
0.2304
0.171
-0.032
-0.0869
0.1337
0.3957

1
0.6979**
-0.1729
0.2822
0.2931
-0.4423
-0.0726
-0.1408
-0.1691
0.0193
0.3175
0.329
-0.3191
-0.3896
-0.2701
0.0891
0.4774
-0.3689
-0.3744
0.1061
-0.3405
-0.2299
0.0156
-0.1994
-0.2982
0.5955*
-0.5942*
-0.2661
0.3051
-0.4299
-0.523
-0.6844**
-0.6178*
-0.5388
-0.6593**
-0.6821**

1
0.1228
0.6659**
0.1871
-0.4597
-0.0022
0.2266
0.4952
0.594*
0.4465
0.6734**
0.2039
0.0114
0.2969
0.2527
0.5571*
0.1763
-0.1948
0.3209
-0.109
-0.289
-0.2756
0.4124
-0.4457
0.3828
-0.1717
0.1952
0.0611
-0.1807
-0.2673
-0.2939
-0.513
-0.4334
-0.2549
-0.1536

1
0.7011**
0.2001
0.3188
0.7158**
0.7279**
0.3819
0.1044
0.6389**
0.0089
0.3983
-0.0717
0.2373
-0.2896
-0.0228
0.0136
0.2377
-0.4084
0.3095
-0.3173
-0.4022
0.4179
0.3165
-0.4684
0.5041
0.7002**
0.0037
0.0162
0.1845
0.2694
0.4803
0.1299
0.3578
0.5587*

1
0.0395
-0.2339
0.3097
0.4944
0.5868*
0.3843
0.7635**
0.5543*
0.3795
0.0338
0.3937
-0.0818
0.2123
0.1191
-0.0485
-0.0271
-0.059
-0.4896
-0.5326
0.6017*
0.0738
-0.0287
0.2799
0.5944*
0.1104
-0.0971
-0.2265
0.0699
-0.1133
-0.0395
0.193
0.3587

HUN

POL

ROM

NOR

SWISS

AUT

BEL

DEN

NLD

FIN

SWE

1
0.0548
-0.1339
-0.3636
-0.1902
-0.1049
-0.1203
-0.1183
-0.1619
0.5035
0.4748
0.0887
0.1334
0.3605
0.4375
-0.08
-0.374
0.441
0.1951
0.5033
-0.3114
0.0245
-0.2835
-0.6362**
-0.3973
0.1774
-0.102
-0.0413
0.184
-0.3399
-0.2683
0.5018
0.1173
-0.0658
0.0655
0.458
0.1007
-0.0676
-0.279
0.2319
0.3387
0.164
0.1145

1
0.8520**
0.4239
0.6196*
0.0386
-0.1725
0.0932
0.6572**
0.5474
0.4371
-0.0236
-0.1802
0.4522
-0.1843
0.59*
0.7153**
0.5322
0.7846**
0.1657
0.1529
0.5218
0.3301
0.2667
0.2407
0.3158
0.3548
0.0435
0.1013
-0.1528
-0.2869
-0.4341
0.6570**
0.1125
0.1336
-0.2305
0.3923
-0.4685
0.0289
-0.1611
0.0549
0.3862
-0.0114

1
0.6609**
0.7260**
-0.038
-0.1075
0.1075
0.8952**
0.4832
0.3051
0.0069
-0.3648
0.2838
-0.3323
0.6066*
0.8370**
0.2389
0.6229*
-0.1138
0.3409
0.382
0.3031
0.5295
0.5186
0.229
0.36
0.1227
0.1012
-0.1861
-0.0536
-0.2926
0.544
-0.1969
0.2129
-0.5083
0.1907
-0.4486
0.2202
-0.2269
-0.2353
0.1887
-0.14

1
0.1488
1
-0.2134
0.538
1
-0.087
0.0384
0.2662
0.1388
0.2336 0.7248**
0.5003
0.6*
-0.0037
-0.3195 -0.1445 0.5659*
0.3651 -0.2087 0.3838
0.7325** 0.3755
0.3999
0.0035
0.3775 0.8574**
-0.1744 -0.4252 0.1684
0.4728 -0.2473 0.1188
0.1954 -0.5729* 0.1412
0.237
0.4105 0.7535**
-0.0423 0.7107** 0.7984**
0.8523** -0.079
-0.2014
0.5198
0.526
0.5385
0.3697
0.4251 0.6595**
-0.6787** 0.2017 0.6685**
-0.1434 0.4212 0.8231**
0.4996
0.3449 -0.2557
0.1516 0.6392** 0.5767*
-0.4554 0.0922 0.7546**
-0.1547 0.3853
0.4282
-0.518
-0.0312 0.5815
0.1299
0.3903
0.4141
-0.1258 0.3207 -0.0393
-0.0593 0.0246 -0.3286
0.4282
0.3393
0.5268
0.2694 -0.1338 -0.4714
0.7779** 0.3428 -0.1119
0.1276 -0.6004* -0.0065
0.0372 -0.0897 0.6061*
0.6412** -0.3271 -0.7743**
0.3761
-0.003
-0.0222
-0.1514 0.2163
0.4428
-0.0149 -0.3485 0.0856
-0.0869 -0.7785** -0.2818
0.1349 -0.5405 -0.0631
0.0337 -0.6327** 0.1505
-0.0898 -0.0661 0.5992*

EUROPEAN UNION
1
0.4444
0.0845
0.5326
0.1883
0.0123
0.432
0.3011
0.1811
0.365
0.2987
0.4712
-0.0478
-0.245
-0.222
-0.0168
-0.0161
0.0428
0.1236
0.0696
-0.1234
-0.0605
0.0028
-0.5339
-0.3147
-0.1438
-0.5239
-0.3784
-0.0156
0.2511
-0.4462
-0.3593
0.3438
0.2552
0.3063
0.0938
0.2287
-0.1808

1
-0.0326
0.6501**
0.626*
0.5927*
0.7612**
0.5216
0.5948*
0.5569*
0.9269**
0.6706**
0.12
0.3312
0.5411
0.4397
0.6631**
0.0445
0.5528*
0.7068**
0.3869
0.534
0.5735*
-0.068
-0.0957
0.4253
-0.629*
0.0152
0.0366
0.8065**
-0.5612*
0.3049
0.3122
0.3427
0.1489
0.3186
0.5148
0.681*

AUT

BEL

1
-0.5928*
1
-0.1068 0.4685
0.3813
0.1322
0.2409
0.4672
-0.4309 0.4556
-0.17
0.3694
-0.2511 0.5121
0.0981
0.467
0.1857
0.4551
0.4096
-0.292
0.2241
0.0456
0.0336
0.1992
-0.4818 0.6064*
-0.2783 0.4975
0.2816 -0.2927
0.5018
0.0087
-0.4943 0.6738**
-0.1126 0.0893
-0.6991** 0.7045**
0.0468
0.1058
0.1293 -0.4274
0.0817 -0.4989
-0.0921 0.2602
0.2693 -0.5269
0.5641* -0.4758
-0.3925 0.1888
-0.169 0.6057*
0.1559 -0.6622**
-0.263
0.0121
-0.3733 0.6027*
-0.5397 0.6797**
-0.606* 0.3955
-0.6638** 0.6063*
-0.6484** 0.7132**
-0.5021
0.598

1
0.7186**
0.5151
0.5792*
0.8514**
0.8269**
0.6555**
0.0175
0.6144*
0.3899
0.5711*
-0.0187
0.335
-0.3102
0.3573
0.3747
0.089
0.2013
0.2717
-0.2888
-0.4444
0.5575*
-0.2672
0.1637
0.5173
0.7723**
-0.0938
0.1942
-0.0841
0.1457
0.324
0.3259
0.6614**
0.508

1
0.4774
0.0956
0.6576**
0.3699
0.7118**
0.3021
0.6773**
0.7165**
0.7134**
-0.1452
0.381
0.1837
0.6103*
0.1295
0.1966
-0.0368
0.4445
-0.0195
-0.3049
0.678**
-0.0474
0.5822*
0.0301
0.4713
0.0396
0.3667
0.0037
0.0019
-0.1747
0.0933
0.1806
0.3598

1
0.1427
0.1715
0.4091
0.713**
0.6966**
0.0628
0.468
0.5362
0.3856
0.4936
-0.3475
0.5065
0.5224
0.0637
0.2939
0.1753
-0.3046
-0.395
0.349
-0.3069
0.0652
0.1655
0.7539**
-0.6319*
-0.2444
0.2102
0.1333
-0.2427
-0.0397
0.2576
0.4601

1
0.7323**
0.662**
0.5059
-0.0923
0.1375
-0.3124
0.078
0.1992
0.3412
-0.1093
0.2903
0.5749*
0.4886
0.4243
0.5426
0.1393
0.1959
0.0688
-0.7307**
-0.405
0.2491
0.5211
-0.2678
0.3509
-0.1067
0.0191
0.7273**
0.2388
0.5658*
0.3935

1
0.7219**
0.6471**
-0.066
0.6441**
0.1877
0.4268
-0.1365
0.3054
0.1179
0.35
0.3042
0.3118
0.1733
0.5245
-0.0328
-0.0765
0.4869
-0.4534
0.1545
0.3131
0.5643*
0.0896
0.5419
-0.0882
0.1208
0.5334
0.401
0.6078*
0.4061

1
0.4019
-0.0989
0.4138
-0.0242
0.1376
-0.0715
0.067
-0.3135
0.032
0.2799
-0.1464
0.1625
0.055
-0.4517
-0.3181
0.1191
-0.2083
-0.1296
0.5929*
0.7045**
-0.0725
0.0939
-0.0428
0.4085
0.6578**
0.5423
0.8404**
0.4485

FIN

SWE

GRC

POR

SPA

FRA

ITA

1
-0.0011
0.2339
0.0033
-0.3951
0.1117
0.0276
-0.2096
-0.2595
-0.4394
-0.3284
-0.2989
-0.0239
-0.3694
-0.3686
-0.335
-0.3002
-0.4752
-0.2795
-0.3651
-0.01
-0.091
-0.3836
-0.3052
0.2032
-0.5115
0.2298
-0.0768
0.0918
-0.1497
-0.1919
-0.1803

1
0.7765**
0.6379**
0.1288
-0.1033
-0.124
-0.7556**
0.3318
0.0667
0.1207
0.3218
0.1585
0.2242
0.8467**
-0.2546
0.6770**
0.6471**
0.3851
0.0121
-0.1402
-0.1924
0.4716
0.4058
-0.2507
0.6591**
0.6227*
-0.0855
0.6015*
-0.1643
0.0783
0.055

1
0.8669**
0.2611
-0.051
0.296
-0.3931
0.5057
-0.0233
0.2649
0.1069
0.3694
0.1466
0.6618**
-0.2043
0.5148
0.279
0.1634
0.2547
0.0251
-0.2376
0.5293
0.6555**
-0.2427
0.3843
0.4155
-0.2482
0.3919
-0.3944
-0.0877
0.0717

1
0.6713**
0.2874
0.3208
-0.1671
0.6824**
0.3215
0.5723*
0.1962
0.5178
0.4975
0.7599**
-0.0401
0.6081*
0.3223
0.0673
0.5167
-0.1983
-0.2438
0.6114*
0.8575**
-0.4099
0.5911*
0.5091
-0.0112
0.3165
-0.2805
0.0388
0.3379

1
0.6714**
0.3218
0.3838
0.7088**
0.5417
0.7600**
0.4487
0.3993
0.7347**
0.5191
0.3057
0.492
0.2089
-0.1388
0.8241**
-0.3958
-0.0012
0.5561*
0.7676**
-0.317
0.5719*
0.2183
0.2184
0.025
-0.0722
0.3215
0.495

GRC

POR

SPA

FRA

ITA

1
0.7081**
0.7009**
0.3687
-0.2584
0.2235
-0.5509*
-0.2432
0.1621
0.208
0.3698
-0.5383
-0.0608
0.4293
0.1337
0.338
-0.1718
0.5276
0.0727
-0.3188
-0.352
0.2907
0.3825
-0.2061
0.4398
-0.1813
0.1444
0.9189**
0.6636**
0.3392
0.4407

1
0.6615**
0.7075**
0.2376
0.61*
0.0083
-0.1952
0.1309
0.3517
0.5123
-0.3303
0.081
0.6153*
0.3369
0.361
0.0258
0.2511
-0.0706
-0.3005
0.0594
0.2136
0.5815*
-0.2949
0.6169*
-0.5829*
0.0321
0.7441**
0.4772
0.5206
0.2224

1
0.2437
-0.2646
0.5107
-0.3362
-0.2445
-0.2612
-0.1758
0.3418
-0.414
-0.2446
0.2958
-0.0405
0.0898
-0.0173
0.2089
0.0711
0.1608
-0.3232
0.235
0.5943*
0.145
0.3745
-0.4888
-0.1787
0.714**
0.4426
0.3325
0.1596

G-7
1
0.6285*
1
0.278
-0.2894
1
0.4864
0.4368
0.3885
0.7219** 0.4157
0.3883
0.3569
0.4891 -0.6983**
0.7486** 0.6412** -0.1919
0.1015
0.2276
0.143
0.7422** 0.4389
0.2162
0.6758** 0.4654 -0.3525
0.5721* 0.3152 -0.1372
0.4466
0.3623 -0.5058
0.7318** 0.372
0.1068
0.1185 -0.0908 -0.1549
-0.034
-0.1588 -0.1048
0.6131* 0.3483
0.4225
-0.6676** -0.4416 0.1128
0.1752
-0.046 0.6894**
-0.0039 -0.2937 0.3883
0.7331** 0.3035
0.2404
-0.4673 -0.6459** 0.5974*
0.3813
0.0261
0.2077
0.1776 0.6613** -0.4631
0.0318
0.2452 -0.2513
-0.0113 -0.3251 0.0521
0.0747 -0.0007 -0.0086
0.3095
-0.033
0.1451
0.593*
0.3344 -0.1244

NAFTA

AMERICAS

1
0.8971**
1
0.0429
0.2487
1
0.5275 0.7231** 0.66**
1
MERCOSUR
0.0547
-0.0459
-0.3475
0.061
1
0.2933
0.4467
0.1804
0.5154
0.144
1
0.1547
0.4828 0.8676** 0.8301** -0.2895 0.3776
1
0.1202
0.3855
0.4081 0.7621** 0.3434 0.6592** 0.6038*
0.0902
0.3634 0.9165** 0.7298** -0.2704 0.0822 0.9283**
0.197
0.4438
0.2426 0.7178** 0.4796 0.7528** 0.5321
-0.1227
0.0465
0.2182
0.2717
0.3357
0.4975
0.2175
-0.382
-0.2079
0.0009 -0.0264 0.4781
0.1164
0.0381
0.8767** 0.9342** 0.1114 0.6693**
0.07
0.2894
0.3498
0.1259
-0.2224
-0.4305 -0.5669* -0.1174 -0.4282 -0.6655**
0.5905*
0.4873
-0.3945 -0.1516 0.2098
0.1683 -0.3358
0.2265
0.2908
-0.1885 -0.0237 -0.4645
-0.444
0.0567
0.2967
0.5531*
0.4221
0.4286 -0.4633 0.3099 0.6749**
0.0682
-0.0965
-0.82** -0.5401 0.3583 -0.4313 -0.7367**
0.2512
0.3881
0.0337
0.5004 0.6135*
0.182
0.2825
0.2739
0.1589
0.3796
0.5236
0.2565 -0.1516 0.3028
0.0308
-0.0365
0.2866
0.0974 -0.0209 -0.5024 0.2214
-0.4875
-0.3151
-0.123
-0.0378 0.0545 -0.3038 0.1364
0.0461
0.0655
0.1433
0.1202
0.0371 -0.5088
0.225
0.034
0.2044
0.2055
0.2097 -0.3009 -0.2885 0.4434
0.4002
0.5994* 0.6629** 0.7487** -0.204
0.1721 0.8238**

1
ANDEAN
0.4625
1
0.935** 0.3449
1
0.7357** 0.1666 0.6429**
1
0.4579
0.0242
0.4326 0.7509**
0.3405
0.2867
0.3912 -0.0863
-0.64** -0.5165 -0.6422** -0.1633
-0.1935
-0.366
-0.0239 0.0625
-0.3513
0.05
-0.3287 -0.5981*
0.0627
0.5343
0.1932 -0.2517
-0.3319 -0.6387** -0.247
-0.0331
0.6297* 0.3137 0.7141** 0.4856
0.1443
0.4095
0.1144 -0.3267
-0.3488 0.4318 -0.2629 -0.5591*
0.0589
0.1655
0.1218
-0.207
-0.2228 0.4272 -0.1185 -0.4521
-0.1511 0.4972 -0.0394
-0.501
0.3729 0.831** 0.3968
0.0682

ASIA
1
0.0412
1
0.1236
0.4178
1
0.5083
0.3018 -0.4513
1
0.1446 -0.0443 0.0205
0.2729
-0.4129 -0.0315 -0.0368 -0.3568
-0.2181 0.2506
0.3001 -0.1496
-0.5551* 0.3946
0.1204
0.1098
-0.1384 0.4255
0.3283
0.0881
-0.1947 0.6574** 0.6809** -0.0957
-0.0821 0.2602 0.6817** -0.3959

ASEAN

INVESTMENT CORRELATIONS
1980-89
EGY
ISR
MOR
TUR
HUN
POL
ROM
NOR
SWISS
AUT
BEL
DEN
NLD
FIN
SWE
GRC
POR
SPA
FRA
ITA
GER
UK
USA
CAN
MEX
CHL
ARG
BRA
PAR
URY
BOL
COL
PER
VEN
AUS
NZL
CHN
IND
JAP
KOR
HGK
INDO
MYS
PHL
SGP
THA
ZAF

EGY

ISR

MOR

TUR

1
0.1628
1
0.2935 -0.2959
1
-0.3806 0.2343 -0.0875
1
-0.6321** -0.021
-0.1696 0.5169
0.2135 -0.1534 -0.4646 0.0757
-0.059
-0.5179 -0.1436 -0.0431
-0.2044 0.1874 -0.4712 0.5042
-0.6032* -0.5426 -0.2041 -0.3696
-0.4886 -0.3613 -0.0099 -0.1789
-0.3573 -0.5269 0.0765 -0.3945
-0.0792 -0.2759 -0.2096 0.4632
-0.3352 -0.6053* -0.2861 -0.0317
-0.051
-0.481
0.3156 -0.3836
-0.1729 -0.6951** -0.0298 -0.3427
0.2079
0.0976
0.1615
0.1141
-0.3718 0.3427
0.2519
0.2546
-0.4171 -0.1868 0.3406
0.2432
-0.538
-0.4248 0.3403 -0.0701
-0.5397
-0.49
-0.1088 -0.4168
-0.456
-0.1192 -0.4074 -0.4205
0.1859 -0.4145 -0.1359 -0.2969
-0.03 -0.6418** -0.3895 -0.2649
-0.611* -0.5012 0.1223 -0.0114
-0.2968 -0.3597 0.4483 -0.1931
-0.6182* -0.5518* 0.169
-0.1171
-0.6343** 0.3043 -0.6530** 0.3065
-0.7564** -0.4296 0.1196
0.4723
-0.6773** -0.2965 0.1072 -0.1278
-0.5887* 0.0395
0.2439
0.1677
-0.3649 -0.3676 -0.0648 0.2923
-0.2965 0.0217 -0.0255 -0.1269
-0.5536* 0.237
0.0928
0.4588
-0.0899 0.1155
0.3308 0.5907*
-0.3755 -0.5777* -0.1401 -0.2986
0.4542 -0.1913 0.3141 -0.0854
0.0545
0.2221 -0.4148 0.3433
-0.393
-0.3107 0.1688 -0.1182
-0.3535 -0.5887* 0.3193 -0.2395
0.3687
0.4024 -0.5852* -0.1192
-0.6151* 0.0717
0.1887
0.0887
-0.3355 0.1555
0.4514 -0.1167
0.4243
0.0216
0.234 -0.9189**
-0.0144 0.3548
0.0252 -0.3661
0.5405
0.248
0.0457 -0.7783**
0.1955
0.215
-0.2927 -0.7592**
0.2741 -0.2846 0.3563 -0.8800**

NOR

SWISS

DEN

NLD

GER

UK

USA

CAN

1
0.0728
0.278
0.227
0.1767
0.3784
0.4416
0.2822
0.5088
0.0809
0.0261
0.1418
-0.1022
-0.5396
0.3488
-0.6658**
0.0323
-0.0223
0.1356
0.0653
0.2028
0.3222
0.2844
0.1266
0.0909
0.3503
0.2313

1
0.3998
0.0456
-0.3949
-0.1133
-0.0027
-0.1337
-0.3705
-0.1027
-0.2878
0.2199
-0.477
-0.3347
0.4202
0.1103
0.2796
0.1009
0.4528
0.4849
-0.3037
-0.5172
-0.0095
0.0147
0.0299
0.2766
0.2496

1
0.2681
0.0979
0.332
0.023
0.0499
0.1147
-0.4681
0.5294
-0.2499
-0.4504
-0.3076
0.6108*
0.1185
0.1742
0.0875
0.1606
0.0421
-0.3706
-0.6112*
-0.0389
-0.5636*
-0.1307
0.0538
0.1078

1
0.6175*
0.9133**
0.2621
0.4198
0.7647**
0.5778*
0.5781*
0.3625
0.3432
0.1743
0.8483**
0.0713
-0.294
0.8926**
0.8194**
-0.6868**
0.5631*
0.3093
-0.0544
-0.0491
-0.4137
0.0495
0.3391

GER

UK

USA

CAN

MEX

CHL

ARG

BRA

PAR

URY

BOL

COL

PER

CHN

IND

JAP

KOR

MYS

PHL

SGP

THA

ZAF

EUROPE

EUROPEAN UNION

G-7

NAFTA

AMERICAS
1
0.8229**
1
MERCOSUR
-0.002
0.1876
1
0.3913
0.5211
0.3465
1
0.8632** 0.9139** 0.3377
0.5411
1
0.4597
0.4889
0.4806
0.4531 0.5904*
0.605* 0.6443** 0.2819
0.4439 0.5654*
0.06
0.1451
0.5034
0.1073
0.2452
0.4386
0.3106 0.5642* 0.4824
0.5131
0.3113
0.0806
0.2402
0.3223
0.1327
0.436 0.7624** 0.3101
0.1763 0.5617*
-0.0913 -0.0573 -0.6988** -0.5259 -0.3274
-0.2547
-0.303 0.5642* 0.1447
-0.273
0.4912 0.7325** 0.1278
0.066
0.5733*
0.4809 0.7062** 0.1161
0.305
0.5218
-0.8616** -0.7629** 0.0877
-0.514 -0.7562**
0.6747** 0.6122* 0.4915
0.4659 0.7694**
0.4641
0.3716
0.0041
0.2627 0.5768*
0.2693
0.0725 -0.3972 -0.5632* 0.1577
-0.25
-0.1878 -0.0417 -0.3795 -0.0531
-0.057
-0.2907 -0.4089 -0.7198** -0.1812
-0.0867 -0.0011
0.045 -0.6727** 0.0314
0.4246
0.3728 -0.3363 -0.3955 0.3132

ANDEAN

1
0.0928
0.7297**
0.8194**
0.4831
0.3156
-0.33
-0.0713
0.5992*
0.6469**
-0.5014
0.9244**
0.5717*
-0.0921
0.3184
-0.2597
-0.0008
0.1453

1
-0.1058
0.3407
0.4757
0.5166
-0.0515
0.1983
0.3262
0.2063
-0.6374**
0.2461
-0.1302
-0.3622
-0.7349**
-0.597*
-0.421
-0.1687

URY

BOL

1
0.5592*
1
0.3132 0.7611**
1
0.3638
0.0423 -0.0513
1
-0.3294 -0.4048 -0.0905 0.0513
1
0.035
0.1226
0.3272 -0.0372 -0.5159
0.4357
0.3114
0.1455 0.7641** 0.3464
0.5487
0.2253
0.1136 0.8028** 0.0789
-0.1208 -0.5321 -0.5187 -0.3368 -0.0538
0.5324 0.8296** 0.4267
0.3095 -0.3977
0.2874
0.4095
0.0587 -0.0765 -0.2762
0.0494 -0.3292 -0.4965 0.0801
0.1641
0.4891
0.0404 -0.3489
-0.141
0.0646
-0.0812 -0.3966 -0.5586* -0.2206 0.2239
0.2719 -0.2985 -0.5936* 0.3008
0.1393
0.2385 -0.2476 -0.3564 0.4716
0.273

ASIA

ASEAN
1
0.4995
1
0.8786** 0.5427
1
0.7573** 0.6434** 0.7520**
1
0.8743** 0.4044 0.6332** 0.7127**

CONSUMPTION CORRELATIONS
1980-89
EGY
ISR
MOR
TUR
HUN
POL
ROM
NOR
SWISS
AUT
BEL
DEN
NLD
FIN
SWE
GRC
POR
SPA
FRA
ITA
GER
UK
USA
CAN
MEX
CHL
ARG
BRA
PAR
URY
BOL
COL
PER
VEN
AUS
NZL
CHN
IND
JAP
KOR
HGK
INDO
MYS
PHL
SGP
THA
ZAF

EGY

ISR

1
-0.134
-0.1805
-0.2344
-0.5308
0.4856
0.7443**
0.6287*
0.7732**
0.0892
-0.0451
-0.0298
0.7997**
-0.1001
-0.2175
0.0129
-0.3199
-0.0254
-0.4847
0.548
0.8468**
-0.3387
0.171
-0.4214
0.7196**
0.4616
0.3081
0.6711**
0.6455**
0.0919
0.349
0.2382
-0.166
-0.1931
0.204
-0.4554
0.068
-0.2576
-0.0226
-0.7105**
-0.115
-0.0113
0.5213
-0.3361
-0.3289
0.0164
0.0076

1
0.0874
0.6367**
0.2327
0.0979
0.1239
-0.4607
-0.0285
0.3963
-0.1615
-0.359
0.0226
0.4355
0.1217
0.6243*
0.2189
0.3977
0.4775
0.0379
0.0317
0.5145
0.0911
-0.3377
-0.3728
-0.2892
0.6967**
0.2888
-0.0455
-0.1563
-0.5186
-0.1336
-0.2577
0.0624
-0.595*
-0.1493
0.1228
0.2244
0.6302*
0.0828
0.634**
-0.701**
0.2777
0.4703
0.2166
0.7804**
0.4554

MOR

TUR

1
-0.4218
1
-0.0695
0.361
-0.199
0.091
-0.255
0.0803
0.0702
-0.411
0.134
-0.1597
-0.2024 0.3098
0.3803 -0.4262
0.5845* -0.4511
-0.2077 0.0485
0.0269
0.1266
0.1852
0.2971
-0.0579 0.0422
-0.0528 0.2074
-0.1143 0.3582
0.4758
0.1794
-0.0128 0.0307
-0.0641 0.0407
0.2106
0.2085
-0.0475 -0.0333
-0.1228 -0.1178
-0.3018 -0.2358
-0.3039 0.0291
0.098
0.414
0.1744 -0.0284
-0.1133 0.1717
-0.0833 0.2874
-0.0812
-0.076
-0.2698 0.4237
0.0635
0.3068
-0.0181 0.3616
0.294 -0.5617*
0.3129 -0.0092
-0.2175
-0.033
0.0547 -0.1389
0.1685
0.0607
0.2829 -0.0839
-0.0779 0.7452**
-0.2844
-0.22
-0.3051 -0.0718
-0.1434
0.437
0.0268
0.2073
-0.1101 0.4404
-0.1561
0.364

MEX

CHL

ARG

BRA

PAR

COL

PER

VEN

AUS

NZL

CHN

IND

JAP

KOR

HGK

INDO

MYS

PHL

SGP

THA

ZAF

EUROPE

1
0.651**
-0.2829
0.2042
0.6687**
0.759**
0.1256
0.2097
-0.4811
-0.5767*
-0.1597
-0.4356
0.3496
0.6526**
-0.1694
0.3268
-0.1231
0.2989
0.1139
-0.1867
0.4124
0.4372
0.1829
0.5632*
0.1302
0.3631
-0.181
0.525
0.1267
0.1939
-0.3631
-0.0816
-0.3992
-0.3533
-0.0428
-0.2035
-0.5731*
-0.6329**
-0.5089
-0.7142**

EUROPEAN UNION
1
0.1295
0.2527
0.2596
0.8441**
0.1978
0.275
-0.0922
-0.1058
0.3836
0.0206
0.774**
0.9004**
0.0353
0.1977
-0.4536
0.5079
0.4551
0.4179
0.415
0.5103
0.4393
0.5722*
0.3885
0.1028
-0.1667
0.2784
-0.2636
-0.0487
-0.1693
0.1743
-0.5786*
0.1048
-0.274
0.0974
-0.1574
-0.2398
0.0933
-0.1705

1
-0.2327
-0.2362
0.1476
-0.096
-0.4213
0.299
0.1496
0.1632
0.0942
-0.1584
0.1861
0.009
-0.1015
-0.5202
-0.2079
-0.2084
0.5608*
0.1886
-0.3323
-0.2604
-0.3634
0.028
-0.4374
-0.1678
-0.5638*
-0.5141
-0.2296
0.6131*
0.2174
0.1342
0.2842
-0.049
0.1571
0.1012
-0.2884
0.6396**
0.1372

1
0.2631
-0.045
0.2087
0.2994
0.1638
0.5296
0.4358
0.5841*
0.4285
-0.0554
0.1207
-0.4269
-0.3527
0.1962
-0.0971
0.0181
-0.2944
0.0335
0.3194
0.3645
0.1246
-0.0103
0.2451
0.7293**
0.0896
-0.28
0.0681
0.5306
-0.2768
-0.1591
-0.2851
-0.0885
0.4595
0.0701
-0.242
-0.3323

1
0.2332
0.146
0.3146
-0.5713*
-0.5115
-0.2728
-0.0337
-0.0945
0.1688
0.1107
0.2836
0.065
-0.3617
-0.3464
-0.2995
0.1505
-0.1107
-0.0094
0.2492
-0.1806
0.4489
-0.167
0.3912
0.4557
0.0725
-0.0477
-0.0635
0.2593
-0.3202
-0.1029
-0.7055**
-0.5727*
-0.5616*
-0.5002
-0.8437**

1
0.2895
0.1883
-0.1382
-0.4216
0.1861
-0.3104
0.5371
0.8874**
-0.0307
0.3819
-0.3551
0.3794
0.2735
0.2608
0.5324
0.5082
0.2392
0.4215
0.2942
0.1586
-0.2838
0.0963
-0.1569
0.1944
-0.274
0.1284
-0.5342
0.0283
-0.239
0.1141
-0.3228
-0.518
0.0399
-0.3209

1
0.571*
0.4005
0.0231
0.5686*
0.3662
0.2584
0.0814
0.839**
0.5965*
0.2038
-0.3169
-0.1411
0.0995
-0.1056
-0.2331
0.0292
-0.0909
-0.3508
-0.0512
-0.297
-0.208
0.0951
0.6593**
0.2303
0.6974**
0.1816
0.2004
-0.777**
-0.0585
0.2242
0.0823
0.3832
-0.1801

1
-0.2859
0.1853
0.6075*
0.4587
0.5298
0.1869
0.6029*
0.2706
0.2205
-0.1325
0.2446
0.0503
-0.2923
0.2256
0.7291**
0.559*
0.3374
0.6985**
0.3034
0.1628
0.3347
0.204
-0.2754
0.1808
-0.106
0.4641
-0.4918
-0.558*
0.2792
0.3096
-0.0532
-0.1984

1
0.4152
0.3614
0.3748
0.0455
-0.1902
0.3406
-0.0408
-0.2383
0.0046
-0.1909
0.4105
0.0488
-0.2664
-0.409
-0.5997*
-0.4323
-0.8298**
-0.2105
-0.3211
-0.3891
0.191
0.4705
0.7502**
0.0371
0.1062
-0.4799
0.731**
0.531
0.3053
0.6861**
0.4994

G-7
1
0.6858**
1
0.2019 -0.0172
1
0.0354
0.3233
0.581*
-0.2988 -0.4263 0.2751
0.6433** 0.4617 -0.5172
0.7018** 0.482
-0.0853
0.4619
0.5152
0.305
0.0929 0.6344** -0.1517
0.6552** 0.6462** -0.3458
0.7589** 0.3783
0.0843
0.7225** 0.5208
-0.148
0.5654* 0.4138 -0.3549
0.189
0.17
-0.0214
0.2834 -0.0112
-0.019
0.3348
0.0573
-0.422
-0.3449 -0.4202 -0.0963
-0.0002 0.1007 0.6072*
-0.2458 -0.1959 0.4739
0.2541
0.0224 0.5859*
-0.7611** -0.6379** 0.356
0.3949
0.2758
0.5191
-0.3838 -0.2575 -0.8114**
0.1836
0.1351 -0.2092
0.3447 -0.2618 0.3189
0.318
-0.2871 0.3684
0.1429
0.1543 0.5717*
0.1531 -0.0914 0.0434

NAFTA

AMERICAS

1
0.5289
1
-0.2782
-0.2435
1
0.1118
0.1759 0.7362**
1
MERCOSUR
-0.0346 -0.6585** 0.0526
0.1279
1
0.2655
-0.467
0.1039 -0.0898 0.4888
1
-0.1359
-0.3513 0.6854** 0.5499* 0.2889
0.4619
1
-0.1694
-0.0638
0.418 0.6635** 0.1638 -0.3105 0.558*
-0.0863
-0.0525 0.5656* 0.657** -0.0561 -0.1527 0.6188*
-0.4678
-0.3772
0.5228 0.5506* 0.2355 -0.1142 0.661**
0.0296
0.192
-0.0765
0.187
-0.2311 -0.1525 0.4061
-0.4384
-0.2356
0.0818
0.1669
0.3331 -0.0655 0.4507
-0.4592
-0.1986
0.4926
0.0981 -0.3701 -0.1352 0.3891
-0.1047
0.3015
-0.3207 -0.3873 -0.6463** -0.3111
-0.114
0.8846** 0.5561* -0.2427 0.0253 -0.0871
0.153
-0.1543
0.1827
-0.0322
-0.46
-0.3149 0.3018 -0.1036 -0.7294**
0.0302
-0.4183
-0.1953 -0.3838 0.4717
0.0784 -0.1793
0.2938
0.5279 -0.8266** -0.5589*
-0.36
-0.3175 -0.8911**
0.1027
-0.1818
-0.1678 0.2601 0.756**
0.09
0.2414
-0.3879
0.2198
0.3101
0.1959 -0.5924* -0.279
-0.0298
-0.102
-0.285
0.5468
0.2156
0.3268
0.3503
0.2336
-0.4781
-0.2784
0.0664
0.063
0.4145 -0.4371 0.0192
-0.0842
0.3353
0.1497
0.4937
0.1848 -0.4321
0.053
0.2645
-0.1997
-0.2087 0.0382 0.7535** 0.1752 -0.2295
-0.144
0.0084
0.2642
0.4295
0.4487
0.0149
0.1537

1
0.8789**
0.839**
0.6681**
0.535
0.3611
0.0209
-0.2496
-0.4297
-0.1342
-0.5616*
0.4638
-0.0517
-0.3227
0.3768
0.3754
-0.1545
0.0336

ANDEAN
1
0.7505**
0.6582**
0.3807
0.601*
0.019
-0.1864
-0.4874
-0.284
-0.638**
0.1084
0.1281
-0.3277
0.0183
0.0547
-0.453
-0.2715

1
0.5722*
1
0.5422
0.4236
0.3163
0.2992
-0.0364 0.5268
-0.5682* -0.1218
-0.5246 -0.612*
-0.2883 -0.4281
-0.6898** -0.1555
0.3799
0.2268
0.2338
0.095
-0.152 -0.7559**
0.3029
-0.128
0.1102 -0.0526
-0.1889
-0.529
0.092
-0.3846

1
0.1826
1
-0.1753 0.3627
1
-0.2657 -0.4066 -0.1775
-0.1592 -0.4956 -0.5387
-0.0398 -0.0595 -0.1747
-0.4288 -0.4561 0.3374
0.5802* -0.5039 -0.3954
-0.1178 0.2217
0.1808
-0.1746 -0.1352 -0.5405
0.529
-0.0181 -0.1939
0.3942 -0.1497 -0.1949
-0.0832 -0.7745** -0.6152*
0.1858 -0.4493 -0.4389

ASIA
1
0.2407
0.2127
0.2197
0.0786
-0.4628
0.0877
-0.2185
0.0558
0.2596
-0.0721

1
0.4227
1
0.4982 -0.0428
1
0.1479
0.2194 -0.1835
1
ASEAN
-0.2916 -0.8249** 0.0434 -0.5336
1
0.0532
0.2764 -0.4018 -0.0728 -0.0591
1
0.1636
0.555* -0.2423 0.5251 -0.3776 0.2066
1
0.0322
0.0398 -0.0371 0.4794 -0.1551 0.1946 0.6142*
1
0.6073* 0.5167
0.122 0.6401** -0.5604* 0.4056
0.4042
0.3327
1
0.0416 -0.0204 -0.1363 0.4649 -0.0195 0.6134* 0.4408 0.7488** 0.5856*

39

Figure 3 Band Pass Filter Output, Investment and Consumption Correlations for 1990-2003
OUTPUT CORRELATIONS
1990-2003
EGY
ISR
MOR
TUR
HUN
POL
ROM
NOR
SWISS
AUT
BEL
DEN
NLD
FIN
SWE
GRC
POR
SPA
FRA
ITA
GER
UK
USA
CAN
MEX
CHL
ARG
BRA
PAR
URY
BOL
COL
PER
VEN
AUS
NZL
CHN
IND
JAP
KOR
HGK
INDO
MYS
PHL
SGP
THA
ZAF

EGY

ISR

MOR

TUR

1
-0.1593
0.0997
-0.0008
0.7294**
0.4972
0.4084
0.0172
0.3319
0.0767
0.0761
0.3206
0.29
0.6973**
0.4773
-0.3904
-0.0087
0.1033
0.1368
0.0061
-0.3318
0.7543**
0.6834**
0.6869**
-0.0368
-0.428
-0.2465
0.2591
0.2511
0.011
0.2882
-0.0528
0.1105
-0.6762**
0.5968*
0.5046
-0.1661
0.6714**
-0.2244
-0.2038
-0.2982
-0.3784
-0.2066
0.2354
0.3092
-0.2158
0.4482

1
-0.1748
0.0566
-0.1438
0.2539
0.0729
0.4296
-0.0327
0.2949
0.4292
0.4507
-0.3824
-0.0231
0.3515
0.2652
0.234
0.1141
0.2644
0.4482
0.3494
0.0905
0.138
0.1696
0.0029
0.2669
0.143
0.4165
-0.2725
0.1453
-0.1895
-0.0239
0.3526
0.2904
-0.3112
0.0495
0.2764
-0.0895
0.1845
0.5034
0.5997
0.2464
0.4643
0.151
0.4906
0.3162
0.104

1
-0.3694
-0.0577
-0.3515
0.0674
0.0985
0.0909
0.2743
0.0213
0.309
0.2852
0.1477
0.0944
0.291
0.1283
0.2196
0.0885
0.062
0.2118
0.0813
-0.1511
-0.1592
0.301
-0.3571
-0.02
-0.0664
-0.1609
0.0785
0.4442
-0.0611
-0.0166
-0.2438
-0.162
-0.1439
-0.2838
0.017
0.205
-0.1805
-0.3394
-0.1094
-0.238
0.0555
-0.2177
-0.1217
0.2774

1
0.0698
0.2377
-0.0798
0.2082
0.1223
-0.1754
-0.1473
-0.4267
-0.4571
0.1344
-0.2986
-0.087
0.1355
-0.0626
-0.1713
-0.0753
-0.2486
-0.0637
0.1313
-0.1934
0.1266
0.5426*
0.2023
-0.0287
0.0006
0.1725
0.1865
0.3187
-0.2524
0.5355*
-0.0096
-0.2423
-0.0297
-0.1428
0.3364
-0.1336
0.2164
0.1228
0.1608
0.2325
0.1229
-0.1512
0.081

HUN

POL

ROM

NOR

SWISS

AUT

1
0.4997
0.4824
-0.0351
0.5922*
0.0978
0.3034
0.3855
0.3609
0.8564**
0.5381*
-0.3403
-0.0754
0.1751
0.3424
0.2163
-0.2546
0.9134**
0.8098**
0.8384**
0.0503
-0.2802
-0.3666
0.2322
0.3657
0.0448
0.0919
0.2664
0.0176
-0.5978*
0.5636*
0.4759
-0.2255
0.778**
-0.052
-0.1156
-0.0721
-0.1707
-0.0735
0.4942
0.4116
-0.0581
0.5049

1
0.308
0.5513*
-0.2557
-0.4188
-0.1354
0.3
0.2998
0.3075
0.0838
-0.5365*
-0.3599
-0.3999
-0.2919
-0.2037
-0.6421**
0.5203
0.658**
0.4873
-0.1072
0.3908
0.3399
0.5784*
0.2021
0.5563*
0.0554
0.3165
0.538
-0.1528
0.7655**
0.5463
0.6047**
0.4521
-0.4048
-0.0794
0.1989
-0.0251
0.1725
0.1386
0.4595
-0.0593
0.2021

1
0.098
0.0499
-0.313
-0.0618
0.348
0.4249
0.4253
0.3364
-0.3661
-0.2514
-0.2014
-0.1158
0.2143
-0.3118
0.6111**
0.0671
0.2948
-0.6167**
0.0859
-0.6136**
0.5772*
0.7653**
-0.4407
0.0595
0.5486*
0.381
-0.5189
0.141
0.7669**
0.0025
0.7064**
0.2516
0.4239
0.2431
0.5169
0.4712
0.6935**
0.4718
0.677**
0.809**

1
-0.3439
-0.2434
0.123
0.5388*
-0.1156
0.1875
0.0812
0.2113
0.1048
-0.0481
-0.26
0.1484
-0.1265
0.1674
0.1643
-0.0399
0.0414
0.5421*
0.4894
0.544*
0.1228
0.5331*
0.4674
0.3037
0.6889**
0.3734
0.1703
0.0313
0.3926
-0.0188
0.1601
0.167
0.2975
0.31
0.3889
0.2891
0.3395
0.0319
0.3667

1
0.7289**
0.714**
0.2274
-0.2861
0.7308**
0.6538**
0.3391
0.5552*
0.7729**
0.8444**
0.6293**
0.5101
0.5006
0.459
0.5252*
0.3051
-0.5463*
-0.5563*
-0.2931
-0.0346
-0.3022
0.0665
-0.1396
-0.508
-0.2412
-0.1754
-0.1947
-0.8215**
0.3267
0.4264
-0.0018
-0.1301
-0.2371
-0.1815
0.42
0.144
-0.1322
0.3131

1
0.7746**
0.3319
-0.4707
0.3427
0.6495**
0.6641**
0.7561**
0.8631**
0.9285**
0.6634**
0.8463**
0.1101
0.243
0.2753
0.3754
-0.5574*
-0.272
-0.4459
-0.5315*
-0.1225
0.0113
-0.549*
-0.4502
-0.0521
-0.355
-0.4987
-0.657**
0.0145
0.2549
-0.0403
-0.2531
-0.4536
-0.3525
-0.0355
-0.1334
-0.288
-0.0614

NOR

SWISS

AUT

BEL

DEN

NLD

FIN

SWE

GRC

POR

SPA

FRA

ITA

GER

UK

USA

CAN

MEX

CHL

ARG

BRA

PAR

URY

BOL

COL

1
0.1397
0.0166
0.2189
0.2507
0.4979
-0.1537
0.5548*
-0.1735
-0.442
-0.4676
-0.0183
-0.3421
-0.2227
-0.3468
-0.0132
-0.556*
-0.3319

1
0.3705
0.3309
0.2256
0.1479
-0.2392
-0.1648
-0.0696
0.1314
-0.4072
-0.4047
-0.1838
-0.2952
0.1061
-0.1695
-0.4145
0.364

1
0.4657
0.1842
0.1501
0.3263
0.3092
0.097
0.1253
-0.0071
0.2851
0.4463
0.2788
0.403
0.2446
0.2748
0.4379

URY

BOL

COL

PER

VEN

AUS

NZL

CHN

IND

JAP

KOR

HGK

INDO

MYS

PHL

SGP

THA

ZAF

EUROPE

EUROPEAN UNION

1
0.6503**
1
-0.4903
0.1064
1
0.5804* 0.5829*
0.0099
1
0.8382** 0.7857** -0.1708 0.7434**
0.6905** 0.3517 -0.6735** 0.106
0.7304** 0.2797 -0.7972** 0.3645
0.8677** 0.4142 -0.5874* 0.5451*
0.8812** 0.4178
-0.4075 0.5236*
0.8784** 0.6381** -0.4796 0.5502*
0.7758** 0.3186 -0.6214** 0.0893
0.3796 0.6396** 0.3767
0.863**
0.3873
0.3916
0.1103
0.695**
0.4852
0.5389*
0.2614 0.6941**
0.2318
-0.0288 -0.1315
0.0898
-0.3635 -0.1725 -0.1245
-0.302
-0.3251 -0.1326
0.012
-0.4253
-0.0789
0.4887
0.3758
0.1792
-0.1167
0.1936
0.3322
0.3461
-0.1355
0.1113
0.1589
-0.0547
0.0325
0.3349
0.0164
0.3922
-0.2791
0.0924
0.4043
0.167
-0.061
0.5963*
0.351
0.0299
-0.0066 -0.2439 -0.597* -0.4002
-0.2877
0.1194
0.5503*
0.2925
-0.2505
0.2295 0.6348** 0.2012
-0.5594* -0.0518
0.4166
-0.5119
0.1801
0.3968
0.3514
0.675**
0.4283
0.1116 -0.5446* 0.3084
0.3363
0.2685
-0.2692
0.0034
0.1079
0.0806
-0.1559
-0.113
-0.0464
0.0524
-0.0669 -0.1015
0.0879
0.153
-0.1701 -0.0126
0.3861
0.3944
-0.0867 0.6582**
0.2773
0.3986
0.0271
0.388
0.0241
0.1266
0.054
-0.0745
0.2788
0.5418*
0.1003 0.7033**

1
0.4001
0.5718*
0.7242**
0.7896**
0.8331**
0.5332*
0.6603**
0.479
0.6675**
-0.1146
-0.4408
-0.5536*
0.125
0.1549
-0.2745
0.1419
-0.1702
0.119
-0.3944
0.0121
0.129
-0.4936
0.5658*
0.2407
0.2694
-0.0805
-0.1282
0.0075
0.4369
0.3082
0.095
0.5033

1
0.8571**
0.808**
0.5855*
0.7207**
0.8966**
-0.2587
-0.242
-0.2648
0.1779
-0.0828
-0.0882
-0.3687
-0.2777
-0.1239
0.2784
-0.3155
-0.1514
0.4454
-0.5783*
-0.7363**
-0.5417*
-0.297
0.5573*
0.1618
-0.1201
0.0037
-0.0486
0.0835
-0.2563
-0.1019
0.0293

1
0.9162**
0.7169**
0.7563**
0.8047**
-0.0697
0.0403
-0.0566
0.0977
-0.1758
-0.2753
-0.4567
-0.2516
-0.2146
0.2538
-0.4486
-0.3458
0.2509
-0.3903
-0.6344**
-0.7135**
0.0024
0.5622*
0.1013
-0.2389
-0.1612
-0.116
0.1841
-0.1861
-0.1847
0.1381

1
0.8823**
0.8109**
0.8378**
0.1689
0.2053
0.214
0.2286
-0.4482
-0.3954
-0.433
-0.1958
-0.242
0.2271
-0.4222
-0.3644
0.0196
-0.3255
-0.5287*
-0.8257**
0.1198
0.4938
0.0629
-0.279
-0.2506
-0.2111
0.2438
-0.1099
-0.2116
0.1942

1
0.7816**
0.7888**
0.3079
0.3781
0.4631
0.2314
-0.5225*
-0.4638
-0.3775
-0.2926
-0.2223
-0.0872
-0.4113
-0.4108
-0.1702
-0.2433
-0.3291
-0.6945**
0.2556
0.3008
0.0802
-0.1671
-0.3259
-0.2285
0.1786
0.0031
-0.1319
0.0884

SWE

GRC

POR

SPA

FRA

ITA

G-7

1
0.77**
1
0.3319
-0.1784
1
0.108
-0.181 0.7374**
1
0.2625
-0.0603 0.8673** 0.8547**
-0.1473
0.1655
0.0071
0.3795
-0.1303 -0.3416 -0.2971 -0.2531
-0.5351* -0.3017 -0.3434
0.0724
-0.0015 -0.4073 0.5289*
0.161
0.1361
-0.3584
0.4338
-0.1115
-0.3782 -0.3211
0.0111
0.4478
0.1926
-0.0029
0.224
-0.0319
-0.0129 -0.4508
0.3288
-0.0976
0.02
-0.2956
0.3176
0.0158
0.071
0.2252 -0.5836* -0.4027
-0.3801 -0.6681** 0.4299
0.5993*
-0.2249 -0.604** 0.5935*
0.2853
-0.5795* -0.6184** -0.1373 -0.0217
0.2467
-0.2221 0.7138** 0.5487*
0.592*
0.4749
0.0134
-0.2314
0.383
0.2519
0.0809
-0.1663
0.0666
-0.0675
0.0888
0.0033
0.1346
-0.0798 -0.0302 -0.3817
0.1552
-0.0804
0.0999
-0.1164
0.5001
0.0342
0.5849*
0.2139
0.1665
-0.1762 0.6084** 0.4459
0.2126
-0.0006
0.0938
-0.3119
0.4582
-0.0461 0.682**
0.1887

NAFTA
1
0.1652
-0.4807
-0.2349
0.3476
0.1353
0.0809
-0.107
-0.0247
0.1716
-0.5981*
0.4329
0.5155
-0.084
0.5874*
-0.2326
0.0701
0.1004
-0.2516
-0.0154
0.2972
0.5807*
-0.0377
0.3108

AMERICAS

1
-0.3374
1
MERCOSUR
0.5094
0.3844
1
-0.2136
0.2497
0.1231
1
-0.657** 0.1673
-0.5045
0.5064
1
0.5646*
0.3047 0.8708** 0.1085
-0.4892
0.0041
0.1004
0.1291
0.2192
0.2702
-0.3124 0.5642* -0.0225 0.6024** 0.6485**
-0.3096
0.3212
0.2685 0.8711** 0.4525
0.1445 0.6435** 0.5167
-0.0755 -0.2464
-0.1086
0.0926
0.2309
0.1619
0.1727
-0.3828 -0.0757 -0.2628 0.6922** 0.5702*
-0.1273 0.5578* 0.661** 0.5372* -0.0282
-0.3765 -0.1715 -0.5793* 0.1314
0.4368
0.0079
0.0833
-0.438
-0.0698
0.2003
-0.2449
0.0207
-0.3714
0.3731
0.3036
0.0719
0.3065
0.0934
0.5671*
0.1312
-0.323
0.4167
-0.2172
0.4434
0.5238*
-0.1974
0.333
-0.129
0.5427*
0.3865
-0.1421
0.0434 -0.5266* 0.3869
0.5959*
0.1005
-0.0357 -0.0771 0.7352** 0.3073
-0.4836
0.1571
-0.4927
0.4174
0.5064
-0.2545 -0.0291 -0.5172
0.523 0.6679**

ANDEAN

1
0.0364
1
0.2509
-0.4002
1
0.4955 -0.6667** 0.3893
0.6176** 0.1788
0.3926
0.0394 -0.7556** 0.5301*
-0.2203
0.2468 -0.6822**
0.2557
-0.046 -0.5454*
0.3261
0.2331
-0.3994
0.326
0.1665
-0.4484
0.3722
0.1068
-0.3815
0.1472
-0.1928 -0.1824
0.4376
-0.1937 -0.0555
0.2611
-0.1747 -0.4218
0.3369
-0.33
-0.0413

ASIA
1
0.3794
1
0.5833* -0.1956
1
-0.2384 -0.6078** 0.0143
0.3699
-0.0531
0.0937
0.3612
0.3288
-0.1629
0.3416
0.12
0.0037
0.44
0.1859
0.0561
0.3761
-0.3659
0.5031
0.6368** 0.1612
0.2452
0.5468*
0.0582
0.2352
0.4752
-0.3063 0.5746*

1
0.5558*
0.3526
0.6085**
0.5337*
0.7427**
0.2424
0.4752
0.5957

1
0.7695**
0.8098**
0.8994**
0.6159**
0.6611**
0.8867**
0.4702

JAP

KOR

1
ASEAN
0.7555**
1
0.8909** 0.9241**
1
0.4768 0.6681** 0.6782**
1
0.7983** 0.5141 0.7467** 0.6562**
1
0.6855** 0.8849** 0.8543** 0.6181** 0.5345*
0.2667
0.527*
0.5212 0.9122** 0.5794*

1
0.5192

THA

ZAF

INVESTMENT CORRELATIONS
1990-2003
EGY
ISR
MOR
TUR
HUN
POL
ROM
NOR
SWISS
AUT
BEL
DEN
NLD
FIN
SWE
GRC
POR
SPA
FRA
ITA
GER
UK
USA
CAN
MEX
CHL
ARG
BRA
PAR
URY
BOL
COL
PER
VEN
AUS
NZL
CHN
IND
JAP
KOR
HGK
INDO
MYS
PHL
SGP
THA
ZAF

EGY

ISR

MOR

TUR

HUN

POL

ROM

BEL

DEN

NLD

FIN

1
-0.316
0.358
-0.2071
0.4711
0.579*
0.0284
0.531*
0.3977
0.1179
0.442
0.7640**
0.4112
0.7171**
0.5535*
0.3471
0.5938*
0.5416*
0.2529
0.3212
0.1349
0.7818**
0.3676
0.412
-0.0875
0.101
-0.1441
0.2814
0.3816
-0.0078
0.4871
0.0947
0.4848
-0.2357
0.3688
0.0519
-0.3526
0.4373
0.0249
-0.3353
0.0235
-0.2698
-0.453
0.0539
0.2182
-0.4816
0.6576**

1
0.0268
-0.1805
-0.7352**
-0.1572
-0.3957
-0.3183
-0.2543
0.3426
-0.4484
-0.061
0.0607
-0.2512
0.0173
0.227
0.0305
0.0924
0.0114
0.4144
0.2224
-0.7292**
-0.5988*
-0.4522
-0.109
-0.2395
0.1898
-0.1453
0.0485
0.0746
0.0199
-0.356
-0.1459
0.4795
-0.4616
-0.5825*
0.1045
-0.2709
0.2029
0.3252
0.2632
0.3052
0.3226
-0.5233*
-0.2922
0.3164
-0.2813

1
-0.0111
-0.3076
0.0956
-0.6233**
0.0162
0.0423
0.1537
0.3601
0.1893
0.3382
0.3044
0.2122
0.6294**
0.6137**
0.568*
0.3806
0.4238
0.3283
0.1935
-0.075
-0.213
-0.0794
-0.1422
-0.1481
-0.3454
0.017
-0.0211
0.6119**
-0.6026**
-0.3537
0.2533
-0.1983
-0.5407*
-0.3264
0.0898
0.0165
-0.4309
-0.4472
-0.5331*
-0.5488*
-0.4173
0.2375
-0.541*
-0.1272

1
0.007
0.4137
0.1074
0.3632
-0.1071
-0.0388
0.1832
0.1034
0.1793
0.1289
-0.2241
0.1588
0.1626
-0.2265
-0.2115
-0.0916
-0.2293
0.1598
0.3432
0.1957
0.2138
0.5032
0.2128
0.2706
-0.0061
0.2599
0.3262
0.2125
-0.1801
0.2931
-0.2596
-0.0563
-0.0771
-0.3867
0.3057
0.0156
0.3278
0.2485
0.2406
0.3512
0.0487
-0.0484
0.0744

1
0.3782
0.3918
0.5043
0.4909
0.0848
0.3009
0.3217
0.1283
0.2372
0.144
-0.2132
0.1397
-0.0141
0.104
-0.288
0.0915
0.7997**
0.7163**
0.7014**
0.3978
0.0068
0.1094
0.1994
0.1014
0.1744
-0.008
0.5106
0.3677
-0.4876
0.4647
0.4288
-0.0455
0.1567
-0.2131
-0.3484
-0.0991
-0.3191
-0.379
0.2929
0.2378
-0.4286
0.3005

1
0.233
0.7568**
0.2126
0.1195
0.223
0.6598**
0.6052**
0.4397
0.2473
0.1781
0.5808*
0.1567
0.0272
0.1333
0.0957
0.6068**
0.7448**
0.4943
0.1065
0.1866
0.3261
0.3731
0.3274
0.46
0.5046
0.1935
0.3254
0.0248
0.297
0.0784
-0.0433
0.0651
0.0324
-0.2941
0.1124
-0.1711
-0.219
0.031
0.0777
-0.4264
0.3309

1
0.2991
-0.1403
-0.5498*
-0.2316
0.0786
-0.3695
-0.179
-0.2411
-0.7982**
-0.4701
-0.5985*
-0.4534
-0.5338*
-0.4894
0.2244
0.4566
0.0985
-0.271
0.6177**
0.1843
0.6314**
-0.1708
0.1243
-0.3091
0.8105**
0.5613*
-0.2006
0.5542*
0.7932**
0.5504*
0.2883
-0.3925
0.0005
0.3472
0.2366
0.2278
0.4706
-0.0597
0.2114
0.3313

1
-0.1153
-0.2109
-0.1163
0.3929
0.0664
0.1302
-0.228
-0.0161
0.2846
-0.2417
-0.4395
-0.3587
-0.2936
0.5979*
0.549*
0.3663
0.2593
0.3747
0.5933*
0.3918
-0.0631
0.7263**
0.6974**
0.5061
0.4249
0.2587
0.5745*
0.0102
0.2393
-0.2145
-0.303
-0.6219**
0.2058
-0.2372
-0.4226
-0.0555
0.2946
-0.6435**
0.3545

1
0.7238**
0.6328**
0.6313**
0.5417*
0.5665*
0.7908**
0.2286
0.4018
0.6820**
0.7945**
0.4654
0.6043**
0.5082
0.399
0.5204
-0.0207
-0.3541
-0.4629
0.1772
0.7539**
-0.4418
-0.2585
-0.0438
0.2529
-0.6756**
-0.3335
0.1805
-0.5104
0.5616*
0.2496
0.2226
-0.1936
-0.1567
-0.0529
0.1172
0.1299
-0.0829
0.2179

1
0.3788
0.4568
0.6300**
0.3263
0.6190**
0.5189
0.5707*
0.6805**
0.7762**
0.6844**
0.8374**
0.09
0.0573
0.303
0.2902
-0.532*
-0.1251
-0.16
0.5313*
-0.1666
-0.0231
-0.3368
-0.1223
-0.1536
-0.6710**
-0.4539
-0.4787
0.0325
0.4024
0.2046
-0.0772
-0.0997
-0.0215
-0.2815
0.0058
-0.1101
-0.1379

1
0.4765
0.6792**
0.8099**
0.6623**
0.5162
0.6392**
0.7165**
0.6827**
0.5782*
0.445
0.5576*
0.3272
0.6002*
0.1273
-0.0705
-0.5759*
-0.06
0.4278
-0.5109
0.047
-0.3159
-0.1259
-0.4053
-0.2714
0.0415
-0.8314**
0.3175
0.5542*
0.1616
-0.132
-0.041
-0.01
0.4945
0.228
-0.0796
0.2868

1
0.5412*
0.7260**
0.6828**
0.3096
0.6179**
0.5756*
0.4008
0.5154
0.2931
0.6146**
0.4048
0.4481
-0.1958
0.2114
-0.1455
0.5969*
0.6587**
-0.1077
0.3053
0.2126
0.5925*
-0.1847
-0.1004
0.0291
-0.3484
0.4758
0.2168
0.0287
0.3193
0.053
-0.0274
0.1103
0.2214
-0.2176
0.6181**

1
0.6626**
0.6818**
0.6390**
0.8447*
0.7341**
0.6875**
0.7327**
0.6829**
0.3718
0.4296
0.5406*
0.2539
-0.3736
-0.168
-0.1899
0.5209
-0.0772
0.2171
-0.505
-0.1984
-0.183
-0.2681
-0.2323
-0.6422**
0.0959
0.536*
0.0875
-0.1854
-0.1649
-0.0947
0.0262
-0.0392
-0.1871
0.0435

1
0.8083**
0.6427**
0.6202**
0.7646**
0.5055
0.6652**
0.1957
0.6026**
0.2192
0.4924
-0.1255
0.0807
-0.5894*
0.2281
0.6772**
-0.4695
0.2281
-0.177
0.1834
-0.4043
-0.1587
0.0545
-0.8334**
0.4195
0.6587**
0.2405
0.153
0.1514
0.0436
0.4563
0.0088
-0.0131
0.7020**

1
0.5127
0.5004
0.8894**
0.8124**
0.8121**
0.5252*
0.3882
0.1475
0.2929
-0.2708
-0.2762
-0.6782**
0.1063
0.8164**
-0.6233**
-0.1466
-0.3066
0.1549
-0.6208**
-0.3502
0.0851
-0.7095**
0.6479**
0.5508*
0.3968
-0.0652
0.038
0.0557
0.1713
-0.2152
0.1344
0.448

1
0.7157**
0.7543**
0.4871
0.7449**
0.3869
0.1656
-0.1916
0.1111
0.2058
-0.2639
-0.3018
-0.3539
0.3623
-0.1774
0.52
-0.6471**
-0.4147
0.093
-0.4803
-0.6495**
-0.7938**
-0.1545
0.6889**
0.043
-0.0647
-0.062
-0.1716
-0.1096
-0.0988
-0.208
0.1618

1
0.7135**
0.5613*
0.6608**
0.6554**
0.482
0.3316
0.4887
0.3665
-0.2009
0.0445
-0.1766
0.271
0.1286
0.6080**
-0.4174
-0.1372
0.1551
-0.194
-0.5209
-0.5626*
-0.0506
0.3283
-0.2772
-0.1131
-0.3237
-0.362
-0.1569
0.295
-0.5383*
0.0653

1
0.8594**
0.8805**
0.6644**
0.3193
-0.0043
0.2379
-0.0849
-0.421
-0.5866*
-0.1837
0.6489**
-0.5116
0.1266
-0.5934*
-0.0987
-0.3479
-0.4411
-0.2923
-0.8002**
0.4243
0.5281*
0.1793
-0.2384
-0.1693
-0.1589
-0.0667
-0.0042
-0.114
0.2196

1
0.7611**
0.8523**
0.2686
0.1744
0.223
0.021
-0.5267*
-0.5283*
-0.2919
0.522*
-0.5156
-0.1916
-0.5235*
-0.2501
-0.4891
-0.5333*
-0.1436
-0.6197**
0.4419
0.3784
0.1884
-0.4183
-0.2885
-0.152
-0.0739
-0.0895
-0.0643
-0.0828

1
0.6376**
0.0414
-0.1582
0.0947
-0.098
-0.2635
-0.4852
-0.1526
0.5398*
-0.4874
0.0817
-0.5887*
-0.197
-0.1196
-0.6163**
-0.4012
-0.7285**
0.2496
0.6994**
0.3896
0.0536
0.1392
0.143
-0.0137
-0.2104
0.1541
0.1787

HUN

POL

ROM

NOR

SWISS

AUT

BEL

DEN

NLD

FIN

SWE

GRC

POR

SPA

FRA

ITA

GER

UK

USA

1
0.1166
0.1926
0.2864
0.3575
-0.6407**
-0.05
-0.4399
0.231
-0.0945
-0.0369
-0.5144
-0.3039
-0.1189
-0.4403
-0.4159
-0.3616
0.0765
0.1587
-0.0461
-0.4018
-0.4092
-0.2597
-0.3654
0.0919
-0.2666
-0.4056

1
0.7435**
0.5652*
0.1483
0.196
-0.0795
0.2622
0.253
0.0736
0.3581
0.3075
0.3041
-0.4036
0.3482
0.2774
-0.2792
0.3453
-0.0463
-0.4469
-0.1219
-0.4045
-0.5194
0.2717
0.2072
-0.5819*
0.5194

1
0.5644*
0.2128
0.0939
0.2304
0.2347
0.1418
0.3323
0.1052
0.3315
0.1994
-0.3243
0.3709
0.4301
0.0902
0.2148
-0.2294
-0.3855
-0.2325
-0.4221
-0.3474
0.1804
0.1199
-0.4551
0.0894

GER

UK

USA

CAN

MEX

CHL

ARG

1
0.5276*
-0.1136
0.0387
0.14
0.3006
0.0642
0.0604
0.1413
0.2644
-0.2543
0.1767
0.1488
-0.4295
-0.046
0.2435
0.0035
0.1033
0.0157
0.0153
0.4266
0.4583
-0.2105
0.2359

1
-0.3007
0.511
-0.5043
-0.3862
0.503
0.2878
-0.0916
-0.4063
0.2852
0.0358
-0.4483
-0.1326
-0.7493**
0.0645
-0.3703
-0.094
-0.2534
-0.2941
-0.081
0.2539
-0.4434
-0.3768

1
0.1047
0.6807**
-0.2235
0.0716
0.2371
0.6703**
0.3666
0.2673
0.1624
0.2811
0.2439
0.0361
-0.044
-0.0293
0.6725**
0.4456
0.2777
0.4971
0.061
0.1198
0.5441*

1
-0.0159
-0.567*
0.9593**
0.443
0.3293
0.0443
0.6848**
0.3556
-0.3197
0.6691**
-0.6506**
-0.546*
-0.6033**
0.1196
-0.2495
-0.2914
-0.4651
0.2588
-0.4923
-0.3949

CAN

MEX

CHL

ARG

BRA

PAR

PER

VEN

AUS

NZL

CHN

IND

HGK

INDO

MYS

PHL

SGP

EUROPE

EUROPEAN UNION

G-7

NAFTA

AMERICAS

MERCOSUR
1
0.3887
1
-0.0536
-0.492
1
ANDEAN
-0.0262 -0.1797 0.5771*
1
0.7568** -0.1196
0.2642
-0.0658
1
0.8519** 0.3784
0.0104
-0.0496 0.6876**
1
-0.0998 -0.5775* 0.6127** 0.6079** -0.0421
-0.19
1
0.1143
-0.3432
0.4476
0.1555
0.3928
0.3867
-0.0584
1
0.4826
0.1963
-0.3018 -0.5948* 0.5173
0.4644 -0.6883** 0.4522
1
0.2079 -0.5397* 0.5898* -0.0756
0.5197
0.2418
0.3385
0.4427
0.2099
1
0.4131
0.5776* -0.6160** -0.3899
0.0887
0.4748 -0.7144** 0.0551 0.6060** -0.1302
1
-0.0773
0.4837 -0.5276* -0.0456 -0.3965 -0.2864 -0.1679 -0.5869* -0.1961 -0.8360** -0.0681
0.2208
0.5191 -0.7125** -0.6544** -0.12
0.0664
-0.3417 -0.5252* 0.2423
-0.3821
0.2359
0.6510** 0.0591
-0.0078
0.0857
0.5401*
0.465
0.3197
-0.1256 -0.0018
0.0104
-0.1793
0.4673
0.2007
-0.3839 -0.3156
0.2488
0.2478
0.0675
-0.3033
0.1574
-0.1688 -0.0676
0.3956
0.2546
-0.4491 -0.527*
0.132
0.1634
-0.0203 -0.4024
0.2356
-0.1205
0.0117
0.3672
0.1503
-0.4799 -0.3198
0.3227
0.1613
-0.3984
0.0547
0.5865* -0.3841
0.1886
0.1709
-0.1127
0.2169
0.3097
0.1372
0.3217
0.3167
0.1496
-0.1722
0.0193
-0.1076
0.1974
0.2238 -0.6265** -0.7223** -0.0035
0.0369
-0.2488 -0.3298
0.36
-0.1105
0.1846
0.6621** 0.4663
-0.3207
0.1498
0.4356 0.6096** -0.334
0.1846
0.3686
-0.3474
0.4336

ASIA

1
0.6672**
1
0.3317
0.4033
1
ASEAN
0.5635* 0.8018** 0.8354**
1
0.5112 0.8937** 0.6496** 0.9330**
1
0.481
0.4844
0.4302
0.5939* 0.5442*
1
-0.3337 -0.3479
0.0175
-0.1832 -0.1639
-0.061
1
0.4706 0.9239**
0.42
0.8209** 0.8991** 0.4974
-0.45
0.3455
0.2225
0.5569*
0.4266
0.1883
0.5659* -0.0994

1
0.1565

THA

ZAF

1
0.5231*

CONSUMPTION CORRELATIONS
1990-2003
EGY
ISR
MOR
TUR
HUN
POL
ROM
NOR
SWISS
AUT
BEL
DEN
NLD
FIN
SWE
GRC
POR
SPA
FRA
ITA
GER
UK
USA
CAN
MEX
CHL
ARG
BRA
PAR
URY
BOL
COL
PER
VEN
AUS
NZL
CHN
IND
JAP
KOR
HGK
INDO
MYS
PHL
SGP
THA
ZAF

EGY

ISR

1
-0.0038
1
0.3216
-0.232
-0.0558 -0.1445
0.1466
-0.1774
-0.1517
0.3805
-0.1869 -0.0124
-0.1431
0.4021
0.4513
-0.4874
0.3065
-0.0695
0.5156
-0.1547
-0.1622 -0.0744
0.5308* -0.2078
0.3273
-0.2321
0.5736* -0.0091
0.1682 -0.5631*
0.055
-0.2781
0.3614
-0.4318
0.3874
-0.1771
0.2165
-0.3534
0.3083
-0.2088
0.2976
0.1295
0.205
0.33
0.2003
-0.062
0.4792
-0.2887
-0.5982* 0.2587
0.0321
0.0186
0.211 0.7838**
-0.2094
0.1546
-0.162
0.2271
0.1529
-0.2017
-0.5631* -0.0832
-0.2392 0.6407**
-0.2976 -0.0708
0.3287
0.053
-0.0254
0.4781
-0.4412
0.4574
-0.1568 -0.2646
-0.1284 -0.2392
-0.1636
0.3197
-0.2082
0.3516
-0.1238
0.0499
0.0994
0.3727
-0.4393 -0.3808
0.1197
0.4543
-0.2603
0.4444
0.058
0.0314

MOR
1
-0.369
-0.1328
0.0307
0.0664
0.1664
0.3478
0.189
0.1776
0.5366*
0.035
0.246
0.1952
0.2426
-0.1883
0.0479
0.1388
0.1488
0.0258
-0.1262
-0.3337
-0.2455
0.1113
-0.0597
0.2412
-0.1936
0.2708
0.014
-0.0526
-0.1971
0.1006
-0.3
-0.1051
0.282
-0.4343
0.2645
0.298
-0.2382
-0.2651
-0.0935
-0.0427
0.2787
-0.4294
-0.205
0.1968

TUR

BRA

PAR

URY

BOL

COL

PER

VEN

AUS

NZL

CHN

IND

JAP

KOR

HGK

INDO

MYS

PHL

SGP

EUROPE
1
-0.2452
1
0.0265
-0.3576
1
0.0994
-0.0422 -0.5728*
1
0.3355 -0.7471** 0.5777*
0.0426
-0.0276
0.133 -0.7280** 0.437
0.0969
-0.2125 -0.3235 -0.0467
-0.1719
-0.059
-0.354
-0.2344
-0.521
0.0153
0.3864
-0.0242
0.2292
-0.2073 -0.1926 -0.0236
0.1412
-0.2524 -0.4342 0.6077**
-0.0848 -0.2269
-0.211
-0.0663
0.0121
-0.2181 -0.4824
0.0897
0.2852
-0.4007
0.1074
-0.447
0.0525
-0.08
-0.3899 -0.1669
-0.2561
0.1934 -0.6974** 0.2409
0.0014
-0.2929 -0.1977
-0.225
-0.2037
-0.291
-0.2102 -0.3281
0.1185
0.5691* -0.3883
0.519
-0.1685 0.6019* -0.1561
0.1765
0.1998
0.4474
-0.3364
0.3761
0.0323
0.5889* -0.0406 -0.5715*
0.3515
-0.3903 0.5707* -0.1405
0.1106
-0.3367 0.5214* -0.4435
-0.0503 -0.3224
0.0407
0.2672
-0.2921
0.2438
-0.2177
0.3459
0.0014
0.1725 0.7595** -0.6185**
0.2398
0.1608
0.4399 -0.5289*
0.5289* -0.1726 -0.1917
0.3303
-0.2558 -0.5074 0.5894*
-0.023
0.3129
-0.1783
0.3144 -0.6622**
0.074
-0.2148 -0.5706* 0.6559**
-0.3955
0.0345
-0.0775 0.6756**
0.1504
0.0219 0.7180** -0.4625
0.0263
0.3418
0.2044
0.2641
0.1415
-0.27
-0.5492* 0.5941*
-0.001
-0.4108 -0.0379
0.1959
0.1484
-0.1358
0.3898
-0.3492
0.2605
-0.4118 -0.1819 0.6145**
0.0348
-0.2583 -0.2585
0.363
0.1231
-0.2657 -0.1086 0.5765*
0.1857
0.1449
-0.0311
0.0496
0.1136
-0.3412
-0.122
0.4956
0.2399
-0.3166 -0.3871 0.8408**

1
-0.3984
1
0.2101
0.4244
1
-0.2017 0.6132** 0.7891**
0.1198
-0.0324 -0.2732
0.0787
0.5811* 0.647**
0.2428 0.6442** 0.4811
0.1225
0.5661* 0.8013**
-0.1244 0.7423** 0.7274**
0.0794
0.115
0.464
-0.1664 0.6194** 0.8006**
-0.3791 0.7379** 0.6618**
0.0165
0.5202 0.7845**
-0.122
0.2973 0.6032**
-0.1559
0.3005
-0.0058
-0.2868
0.1454
-0.0159
-0.1302
0.3564
0.131
-0.3094
0.0666
0.315
0.5451* -0.5226* -0.158
0.5206
-0.0787
0.4508
0.2996
-0.1547 -0.0726
-0.0819 -0.0484 -0.1927
0.2632 -0.5609* -0.1231
-0.064
0.0428
-0.0455
0.086
-0.1124 -0.1519
0.5216* -0.4995 -0.3412
-0.004
-0.4094
0.027
0.0333
0.5169
0.2477
0.1825
0.0468
-0.2567
0.3326 -0.8573** -0.2852
0.0237
-0.0268 -0.5342*
0.2181
0.3021
0.3874
0.4245
-0.3768
0.129
0.3479 -0.7621** -0.1516
0.3633
-0.0465 -0.1816
0.3396
-0.0858
0.2508
0.0614
0.3177
-0.289
0.1819
-0.4125 -0.0112
0.4614
-0.3279
0.0149
0.3145
0.4467
0.1064

EUROPEAN UNION
1
-0.1139
1
0.6629** -0.2874
1
0.312
-0.0297 0.6565**
1
0.887** -0.0185 0.7944** 0.6059**
0.7812** -0.0576 0.7008** 0.5678*
0.4836
-0.3889 0.6785**
0.08
0.8693** -0.2451 0.8349** 0.4762
0.7066** -0.304 0.6577** 0.5239*
0.8824** 0.0058 0.6935** 0.3867
0.7116** -0.3515 0.6354** 0.2362
-0.1012 -0.0437
0.1077
0.4213
0.0523
-0.0161
0.2444
0.1609
0.114
0.0822
0.2485
0.4789
0.352
-0.0645
0.1458
-0.1855
-0.3419
0.2679
-0.4526 -0.4374
0.3888
0.443
0.288
0.0563
-0.0381 -0.1783 -0.1251
0.0856
-0.22
0.3776 -0.7353** -0.1823
-0.1899
0.3999
-0.178
-0.5201
0.195
0.2854
0.3016
-0.2112
-0.345
-0.2412 -0.4888 -0.2452
-0.2839
0.4728
-0.4782 -0.2569
0.0866
-0.2342 -0.2255 -0.6941**
0.2485
-0.2695
0.391 0.7762**
-0.3632
0.3278
-0.2368
0.3086
-0.4964 -0.0321 -0.2949 -0.5925*
-0.57* 0.6302** -0.2979
0.0742
0.0584
-0.1208 -0.0922
0.4911
-0.1564 -0.2485 -0.1934
0.2047
-0.3361 -0.0922 -0.5914* -0.4743
-0.3837 -0.1094 -0.1942
0.4451
0.0172
-0.217
-0.1925
0.2988
-0.3231
0.2914
-0.0289
0.2629
-0.2185 -0.3341 -0.2807 -0.0254
-0.3589 -0.2581
-0.326
0.2226
-0.0416
0.0763
0.0856 0.7063**

1
0.7127**
0.4035
0.8078**
0.6354**
0.828**
0.606**
0.1014
0.1833
0.3171
0.213
-0.3389
0.5013
0.1323
-0.2915
-0.1671
0.172
-0.4941
-0.1431
-0.2027
0.4637
-0.1258
-0.4502
-0.4033
0.0965
0.0172
-0.33
-0.1415
0.168
-0.289
-0.0727
-0.1611
0.2081

1
0.5936*
0.9088**
0.6992**
0.9071**
0.6794**
-0.1818
-0.156
0.0867
0.0811
-0.2917
0.3033
-0.3769
-0.3149
-0.3701
0.1019
-0.1227
-0.4657
-0.0173
0.3026
-0.3542
-0.5986*
-0.3285
0.3302
-0.1565
-0.5589*
-0.1584
-0.123
0.211
-0.5024
-0.3124
0.1594

1
0.7167**
0.3147
0.6695**
0.7667**
-0.5512*
-0.2195
-0.3263
0.0697
-0.0655
0.3148
-0.3602
-0.8461**
0.0292
0.3444
-0.1754
-0.3643
0.4439
-0.1167
-0.6922**
0.1023
-0.5416*
-0.2335
-0.1488
-0.2658
-0.3649
-0.4139
-0.0089
-0.4386
-0.3935
-0.4074

G-7
1
0.7447**
1
0.9161** 0.5423*
1
0.7906** 0.633** 0.7068**
1
-0.1003
0.2183
-0.2858
-0.472
1
0.0477
0.3591
-0.1436 -0.1812 0.7579**
0.1593
0.1804
0.0734
-0.3424 0.8659**
0.3291
0.1328
0.2132
0.089
0.2035
-0.4166 -0.6941** -0.112
-0.4911 -0.3353
0.3402
-0.1551 0.5902*
0.0785
-0.2145
-0.3428 -0.1066 -0.2679 -0.1243
0.1955
-0.5185 -0.2524 -0.3534 -0.5835* 0.2377
-0.213
-0.4565
-0.098
-0.3236 -0.0847
0.2321
-0.1841
0.2986
-0.0963 -0.0249
-0.3398 -0.3712
-0.224
-0.4241 -0.1397
-0.5806* -0.5872* -0.265
-0.3242 -0.2718
0.0511
-0.3811
0.1963
0.1431 -0.6685**
0.2457
0.4241
0.1577
0.196
0.4318
-0.4997
0.0566
-0.5031 -0.4292
0.4837
-0.4058 -0.5212 -0.3832 -0.2673 -0.1566
-0.4621 -0.4243 -0.4389 -0.7468** 0.4364
0.0854
0.1787
0.1281
0.0123
0.0719
-0.1549 -0.1417 -0.1166
0.1332
-0.0558
-0.4652 -0.6667** -0.3274 -0.2599
-0.184
-0.3287 -0.2712 -0.2933 -0.2325
0.1802
-0.1546 -0.0284 -0.0981 -0.0538
0.2284
-0.136
-0.0427 -0.0748 -0.2338 -0.1182
-0.3193
-0.258
-0.3747
-0.272
0.4444
-0.3852 -0.1792
-0.358
-0.1839
0.1629
-0.0833
0.0746
-0.0153 -0.3003
0.4445

NAFTA
1
0.6727**
0.1649
-0.3803
-0.1204
0.1251
-0.116
0.1767
0.2058
-0.4757
-0.2314
-0.5248*
0.1783
0.3771
0.168
0.2036
-0.4447
-0.2489
-0.3573
-0.2831
-0.1544
-0.2332
0.191
-0.1399
-0.0318

1
0.2551
-0.2057
0.112
0.0536
0.1379
-0.0173
0.2269
-0.1363
-0.2682
-0.473
0.4378
0.1827
-0.1957
0.4076
0.0525
-0.0617
-0.1634
0.1493
0.1664
-0.129
0.3664
0.0276
0.4297

AMERICAS
1
-0.2071
0.2896
-0.442
-0.0283
0.4164
0.4264
-0.2833
-0.5211
0.2261
-0.371
-0.5007
0.0518
0.0482
-0.1877
-0.3132
0.1468
-0.5346*
-0.164
-0.6167**
0.1769
-0.4597
-0.4733

1
0.4991
0.0287
0.2741
0.5268*
0.2568
0.608**
0.5561*
0.5611*
-0.4954
-0.1264
0.5023
0.1601
0.0055
-0.0107
0.4624
0.0092
-0.0173
0.1931
-0.0157
0.1159
0.0157

MERCOSUR
1
-0.1941
1
-0.1282
0.2637
0.6132** -0.3141
0.6069** -0.4277
-0.1737
0.0369
0.235
0.628**
0.2925
-0.2164
-0.3071 0.5499*
-0.3281
0.493
0.203
-0.0715
0.057
-0.331
-0.1315
0.1003
-0.1578 0.5292*
0.112
0.3217
-0.323
0.5002
-0.1328 0.6872**
-0.1499 -0.2851
-0.1643
0.56*
-0.2984 0.6275**
-0.0903
0.4517

1
-0.0832
1
ANDEAN
-0.3941 0.6565**
1
0.4392
-0.1882 -0.2237
1
0.3867
0.1907
-0.1294
0.0985
-0.0986
0.3389
0.3196
0.4514
0.0185 -0.8034** -0.4787 -0.0781
0.4282
-0.1905 -0.4804 -0.1317
-0.2281 0.7645** 0.2698
-0.0003
0.2725
0.339
0.304
-0.0053
0.4823 -0.5971* -0.6781** 0.4853
0.198
-0.3725 -0.7305** 0.1173
0.3774
0.2552
-0.2231
0.3221
0.2887 -0.5956* -0.6167** 0.3474
0.5017
-0.4544 -0.7056** 0.2254
-0.0004 -0.2414 -0.0175
0.3562
0.3303
-0.0545 -0.3761
0.0949
0.3876
-0.3969 -0.8046** 0.3449
0.3775 -0.5692* -0.3774
0.3096

1
0.061
1
-0.0347 -0.5909*
1
0.4032 -0.7971** 0.3689
1
0.2291
0.3819 -0.6456** -0.1175
0.034
-0.3998 -0.2023
0.351
-0.0569 -0.1823
0.4778
0.1811
0.3398
-0.0811
0.4721
0.1815
0.4481
0.4739
-0.2118 -0.1838
0.3038
-0.3293 0.6745** 0.3666
0.3317
-0.1925 0.6069** 0.3154
0.0123
-0.2283
0.0425
0.2753
0.1673
-0.0585
0.3138
0.1322
0.3797
-0.2191
0.498
0.4478
0.2024 -0.5456* 0.7569** 0.5352*

ASIA
1
0.0793
-0.5483*
0.0185
0.4335
-0.3021
-0.2661
-0.2405
0.1885
0.024
-0.5812*

1
-0.095
-0.3486
-0.1319
0.0978
-0.2902
0.4338
-0.1075
-0.1765
0.2105

1
0.5299*
0.1444
0.6323**
0.6806**
0.2138
0.2129
0.617**
0.6642**

1
0.6194**
1
ASEAN
0.7293** 0.3184
1
0.8459** 0.5533* 0.7224**
1
-0.3124 -0.5505* 0.2056
-0.3578
1
0.6845** 0.7293** 0.4829 0.7614** -0.666**
1
0.8986** 0.5356* 0.8045** 0.8703** -0.1032 0.6899**
0.3041
-0.1409 0.7463** 0.5708*
0.4071
0.1803

40

Figure 4 Evolution of Average Output, Investment and Consumption Correlations in Each Period
Average Band-Pass Filter Output Correlations
0.400

0.395

0.350

0.285
0.280

0.300
0.250
0.200
0.150

0.157
0.121 0.117

0.122

0.092

1990-2003

0.077

0.100

1970-79
1980-89

0.083
0.043
0.018

0.050
0.000
All Countries

Developed Countries

Developed-Emerging
Markets

Emerging Markets

Income Groups

Average Band-Pass Filter Investment Correlations

0.329

0.350
0.300

0.247
0.234

0.250
0.200
0.150

0.093

1970-79

0.087
0.100
0.050

0.079

0.062
0.013

0.018

1980-89
1990-2003

0.038

0.000
-0.027

-0.038

-0.050
All Countries

Developed Countries

Developed-Emerging
Markets

Emerging Markets

Income Groups

Average Band-Pass Filter Consumption Correlations

0.300

0.254

0.250
0.200

0.154
0.127

0.150
0.100

0.045

0.078

0.074

0.053
0.033

0.058

0.037

0.050

1970-79
1980-89
1990-2003

0.000

-0.002

-0.050

-0.060

-0.100
All Countries

Developed Countries

Developed-Emerging
Markets

Emerging Markets

Income Groups

41

Average Band-Pass Filter Output Correlations

0.900

0.810

0.800
0.673

0.700
0.600

0.546
0.469

0.500

0.448

0.382
0.400

0.400
0.353

0.340

1990-2003

0.227

0.166

0.200

1980-89

0.269

0.265

0.300

1970-79

0.345

0.325

0.278

0.191

0.154

0.138
0.071

0.100

0.014

0.000
G-7

Japan, Korea, European Union

Hong
Kong+ASEAN

Asia

Europe

Americas

Latin America

Regional Groups

Average Band-Pass Filter Investment Correlations

0.585

0.600

0.500

0.457
0.419

0.415

0.398
0.400

0.339
0.313

0.361

0.288

0.300

0.253

0.226

0.218
0.161

0.200

0.160

0.159

0.100

1990-2003

0.048

0.057

1970-79
1980-89

0.097
0.016
0.000
-0.05
-0.07

-0.100
G-7

Japan, Korea, European Union

Hong
Kong+ASEAN

Asia

Europe

Americas

Latin America

Regional Groups

Average Band-Pass Filter Consumption Correlations

0.700

0.622

0.600
0.500

0.426

0.410

0.400

0.350

0.300
0.200

0.222

0.200

0.137 0.171

0.221

0.190 0.189

0.197

1970-79

0.140

0.139

0.074

0.082
0.072

0.100

1980-89
1990-2003

0.037

0.000

-0.008

-0.004

-0.027

-0.100
G-7

European Union

Japan, Korea,
Hong
Kong+ASEAN

Europe

Asia

Americas

Latin America

Regional Groups

41

Table 2 Ranking of Average Output, Investment and Consumption Correlations in Each Period
Band Pass Filter Output Correlations
1970-79
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
G-7
Japan, Korea, Hong Kong+ASEAN
European Union
Asia
Europe
Americas
Latin America

0.121
0.395
0.092
0.018
0.810
0.546
0.469
0.265
0.154
0.071
0.014

1980-89
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
Latin America
G-7
European Union
Americas
Japan, Korea, Hong Kong+ASEAN
Europe
Asia

0.117
0.285
0.083
0.077
0.400
0.382
0.353
0.345
0.278
0.227
0.166

1990-2003
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
Japan, Korea, Hong Kong+ASEAN
European Union
G-7
Asia
Europe
Latin America
Americas

0.122
0.280
0.157
0.043
0.673
0.448
0.340
0.325
0.269
0.191
0.138

1990-2003
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
European Union
Japan, Korea, Hong Kong+ASEAN
Europe
G-7
Asia
Latin America
Americas

0.093
0.329
0.079
0.018
0.585
0.415
0.339
0.313
0.161
0.160
0.159

1990-2003
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
European Union
Japan, Korea, Hong Kong+ASEAN
Asia
Europe
G-7
Latin America
Americas

0.033
0.254
0.058
-0.060
0.426
0.410
0.221
0.189
0.171
0.139
0.082

Band Pass Filter Investment Correlations

1970-79
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
G-7
European Union
Japan, Korea, Hong Kong+ASEAN
Europe
Asia
Americas
Latin America

0.013
0.234
-0.027
-0.038
0.457
0.253
0.057
0.048
0.016
-0.05
-0.07

1980-89
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
Latin America
G-7
Americas
European Union
Europe
Japan, Korea, Hong Kong+ASEAN
Asia

0.087
0.247
0.062
0.038
0.419
0.398
0.361
0.288
0.226
0.218
0.097

Band Pass Filter Consumption Correlations

1970-79
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
G-7
European Union
Japan, Korea, Hong Kong+ASEAN
Europe
Asia
Americas
Latin America

0.045
0.154
0.037
-0.002
0.622
0.222
0.140
0.072
0.037
-0.004
-0.027

1980-89
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
Latin America
European Union
Americas
Europe
G-7
Japan, Korea, Hong Kong+ASEAN
Asia

0.074
0.127
0.078
0.053
0.350
0.200
0.197
0.190
0.137
0.074
-0.008

42

Table 3 Regional Ranking of Average Bilateral Trade Measures in Each Period

trade1 %
1970-79
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
G-7
European Union
Europe
Japan, Korea+ASEAN (exc. Singapore)
Asia exc. Hong Kong, Singapore
Americas
Latin America

0.186
0.453
0.136
0.112
0.822
0.690
0.554
0.330
0.214
0.144
0.108

1980-89
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
G-7
European Union
Europe
Japan, Korea+ASEAN (exc. Singapore)
Asia exc. Hong Kong, Singapore
Americas
Latin America

0.217
0.521
0.180
0.134
1.000
0.817
0.542
0.456
0.297
0.166
0.132

1990-2003
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
G-7
European Union
Japan, Korea+ASEAN (exc. Singapore)
Europe
Asia exc. Hong Kong, Singapore
Americas
Latin America

0.276
0.555
0.278
0.177
1.043
0.901
0.748
0.611
0.502
0.251
0.214

0.480
1.275
0.313
0.300
3.478
1.608
1.239
1.073
0.945
0.819
0.601

1990-2003
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
G-7
European Union
Japan, Korea+ASEAN (exc. Singapore)
Asia exc. Hong Kong, Singapore
Europe
Americas
Latin America

0.533
1.299
0.375
0.366
3.464
1.719
1.572
1.234
1.161
1.030
0.817

0.144
0.332
0.127
0.069
0.446
0.432
0.339
0.199
0.166
0.137
0.120

1990-2003
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
G-7
European Union
Europe
Japan, Korea+ASEAN (exc. Singapore)
Asia exc. Hong Kong, Singapore
Americas
Latin America

0.200
0.382
0.187
0.121
0.523
0.484
0.392
0.350
0.287
0.183
0.164

0.491
0.562
0.497
0.349
0.304
0.297
0.296
0.286
0.272
0.237
0.222

1990-2003
All Countries
Emerging Markets
Developed-Emerging Markets
Developed Countries
Japan, Korea+ASEAN (exc. Singapore)
Asia exc. Hong Kong, Singapore
Europe
Americas
European Union
G-7
Latin America

0.594
0.699
0.594
0.391
0.506
0.467
0.334
0.314
0.314
0.314
0.298

0.082
0.451
0.006
0.001
0.797
0.501
0.286
0.067
0.027
0.024
0.018

1990-2003
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
European Union
Europe
Latin America
Japan, Korea+ASEAN (exc. Singapore)
G-7
Americas
Asia exc. Hong Kong, Singapore

0.165
0.562
0.084
0.079
1.000
0.747
0.400
0.343
0.319
0.312
0.137

trade2%
1970-79
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
G-7
European Union
Japan, Korea+ASEAN (exc. Singapore)
Europe
Asia exc. Hong Kong, Singapore
Americas
Latin America

1980-89
0.477
All Countries
1.270
Developed Countries
0.321
Developed-Emerging Markets
0.272
Emerging Markets
3.375
G-7
1.573
European Union
1.102 Japan, Korea+ASEAN (exc. Singapore)
1.098
Europe
0.868
Asia exc. Hong Kong, Singapore
0.821
Americas
0.564
Latin America

intratrade
1970-79
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
G-7
European Union
Europe
Japan, Korea+ASEAN (exc. Singapore)
Americas
Asia exc. Hong Kong, Singapore
Latin America

1980-89
0.132
All Countries
0.305
Developed Countries
0.106
Developed-Emerging Markets
0.061
Emerging Markets
0.440
G-7
0.393
European Union
0.320
Europe
0.140 Japan, Korea+ASEAN (exc. Singapore)
0.133
Asia exc. Hong Kong, Singapore
0.124
Americas
0.122
Latin America

tradepartner similarity(*)
1970-79
All Countries
Emerging Markets
Developed-Emerging Markets
Developed Countries
Europe
European Union
Asia exc. Hong Kong, Singapore
G-7
Japan, Korea+ASEAN (exc. Singapore)
Americas
Latin America

0.421
0.484
0.429
0.307
0.275
0.255
0.254
0.235
0.229
0.209
0.199

1980-89
All Countries
Emerging Markets
Developed-Emerging Markets
Developed Countries
Europe
Japan, Korea+ASEAN (exc. Singapore)
Asia exc. Hong Kong, Singapore
European Union
G-7
Americas
Latin America

fta membership
1970-79
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
European Union
Europe
G-7

0.061
0.347
0.000
0.000
0.577
0.386
0.286

1980-89
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
European Union
Europe
G-7
Japan, Korea+ASEAN (exc. Singapore)
Latin America
Asia exc. Hong Kong, Singapore
Americas

43

Table 4 Regional Ranking of Average Financial Openness in Each Period

finglobalization
1970-79
All Countries
Emerging Markets
Developed-Emerging Markets
Developed Countries
Europe
Latin America
European Union
G-7
Americas
Japan, Korea+ASEAN (exc. Singapore)
Asia exc. Hong Kong, Singapore

0.151
0.157
0.151
0.145
0.158
0.146
0.144
0.143
0.142
0.125
0.093

1980-89
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
G-7
European Union
Europe
Americas
Latin America
Japan, Korea+ASEAN (exc. Singapore)
Asia exc. Hong Kong, Singapore

0.027
0.423
0.072
-0.279
0.862
0.719
0.599
0.557
0.212
0.045
-0.246

1980-89
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
G-7
Japan, Korea+ASEAN (exc. Singapore)
Asia exc. Hong Kong, Singapore
European Union
Europe
Americas
Latin America

0.184
0.220
0.188
0.154
0.225
0.218
0.213
0.163
0.163
0.124
0.119

1990-2003
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
European Union
Europe
G-7
Japan, Korea+ASEAN (exc. Singapore)
Asia exc. Hong Kong, Singapore
Americas
Latin America

0.433
0.503
0.443
0.379
0.559
0.528
0.427
0.270
0.248
0.248
0.246

0.417
1.800
0.541
-0.710
2.822
1.854
1.538
1.209
0.867
-0.271
-1.136

1990-2003
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
G-7
European Union
Europe
Asia exc. Hong Kong, Singapore
Japan, Korea+ASEAN (exc. Singapore)
Americas
Latin America

2.192
4.201
2.325
0.465
4.459
3.945
3.670
2.366
2.178
1.182
0.570

0.072
0.052
0.054
0.090
0.033
0.034
0.039
0.045
0.052
0.052
0.067

1990-2003
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
Japan, Korea, Hong Kong+ASEAN
G-7
Asia
European Union
Latin America
Americas
Europe

0.066
0.046
0.052
0.082
0.028
0.037
0.040
0.042
0.047
0.055
0.059

0.088
0.035
0.088
0.120
0.025
0.034
0.042
0.042
0.043
0.186
0.211

1990-2003
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
European Union
G-7
Europe
Asia
Japan, Korea, Hong Kong+ASEAN
Americas
Latin America

0.059
0.030
0.061
0.074
0.020
0.037
0.037
0.051
0.051
0.072
0.079

ito
1970-79
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
Americas
Japan, Korea+ASEAN (exc. Singapore)
Latin America
G-7
Asia exc. Hong Kong, Singapore
European Union
Europe

Table 5 Regional Ranking of Macroeconomic Similarity in Each Period

govtspending
1970-79
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
Latin America
Japan, Korea, Hong Kong+ASEAN
G-7
Asia
Americas
European Union
Europe

0.065
0.051
0.057
0.076
0.030
0.032
0.035
0.041
0.046
0.053
0.059

1980-89
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
Latin America
Japan, Korea, Hong Kong+ASEAN
G-7
Asia
European Union
Americas
Europe

realexchrate (*)
1970-79
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
European Union
Europe
G-7
Asia
Japan, Korea, Hong Kong+ASEAN
Americas
Latin America

0.059
0.031
0.060
0.078
0.028
0.032
0.035
0.043
0.047
0.101
0.116

1980-89
All Countries
Developed Countries
Developed-Emerging Markets
Emerging Markets
European Union
Europe
Japan, Korea, Hong Kong+ASEAN
G-7
Asia
Americas
Latin America

44

Table 6 Regional Ranking of Structural Similarity in Each Period

structure
1970-79
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
G-7
European Union
Europe
Latin America
Americas
Japan, Korea, Hong Kong+ASEAN
Asia

0.293
0.159
0.307
0.347
0.119
0.174
0.221
0.242
0.255
0.281
0.369

1980-89
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
G-7
European Union
Latin America
Europe
Americas
Japan, Korea, Hong Kong+ASEAN
Asia

0.281
0.122
0.300
0.332
0.100
0.131
0.218
0.242
0.242
0.313
0.364

1990-2003
All Countries
Developed Countries
Emerging Markets
Developed-Emerging Markets
European Union
G-7
Europe
Latin America
Americas
Japan, Korea, Hong Kong+ASEAN
Asia

0.259
0.099
0.287
0.296
0.086
0.090
0.169
0.213
0.228
0.360
0.384

1990-2003
All Countries
Emerging Markets
Developed-Emerging Markets
Developed Countries
Latin America
Americas
Asia

0.033
0.060
0.026
0.005
0.467
0.318
0.015

1990-2003
All Countries
Emerging Markets
Developed-Emerging Markets
Developed Countries
Latin America
Americas
Asia
G-7
Japan, Korea, Hong Kong+ASEAN
Europe
European Union

0.082
0.100
0.081
0.053
0.244
0.242
0.076
0.048
0.036
0.018
0.013

share of commodity exporters

1970-79
All Countries
Emerging Markets
Developed-Emerging Markets
Developed Countries
Latin America
Americas
Asia
Japan, Korea, Hong Kong+ASEAN

0.194
0.436
0.100
0.016
1.000
0.682
0.227
0.214

1980-89
All Countries
Emerging Markets
Developed-Emerging Markets
Developed Countries
Latin America
Americas
Asia
Japan, Korea, Hong Kong+ASEAN

0.142
0.342
0.059
0.005
0.800
0.545
0.227
0.214

share of net fuel exporters

1970-79
All Countries
Emerging Markets
Developed-Emerging Markets
Developed Countries
Americas
Latin America
Asia
Japan, Korea, Hong Kong+ASEAN

0.054
0.105
0.037
0.005
0.167
0.156
0.076
0.036

1980-89
All Countries
Emerging Markets
Developed-Emerging Markets
Developed Countries
Americas
Latin America
Asia
G-7
Japan, Korea, Hong Kong+ASEAN
Europe

0.084
0.128
0.074
0.032
0.227
0.222
0.091
0.048
0.036
0.006

45

Table 7 Summary Statistics of Data Used in GMM-IV Estimation

Variable
bpoutputcorrel
comlang
trade1
trade2
intratrade
fta
tradepartner
finglobalization
highfingldummy
highfinglobalization
lowfingldummy
lowfinglobalization
govtspending
realexchrate
structure
commoditydummy
oil

Obs
702
702
702
702
701
702
702
702
702
114
702
74
702
702
702
702
702

Mean
0.116
0.111
-3.220
-2.812
-2.357
0.098
-0.871
-1.276
0.162
-0.214
0.105
-2.132
-3.000
-2.771
-1.538
0.194
0.005

Std. Dev.
0.263
0.314
0.736
0.744
1.317
0.246
0.682
0.613
0.369
0.488
0.307
0.199
0.668
0.661
0.574
0.396
0.559

Min
-0.591
0.000
-6.392
-5.903
-9.572
0.000
-3.193
-2.831
0.000
-0.707
0.000
-2.831
-4.969
-5.004
-3.493
0.000
-3.568

Max
0.807
1.000
-0.960
-0.809
-0.285
1.000
0.819
0.803
1.000
0.803
1.000
-1.908
-1.631
-1.161
-0.283
1.000
5.195

Notes:
all variables are in logarithms except for bpoutputcorrel, comlang, fta, commoditydummy and oil
highfinglobalization and lowfinglobalization are constructed by multiplying highfingldummy
and lowfingldummy with logarithm of finglobalization
Belgium, China, Germany, Israel, Paraguay, Poland, Romania, Switzerland and South Africa
are not included due to missing observations

Table 8 Summary Statistics of Data Used in 3SLS Estimation

Variable
bpcorrel
comlang
trade1
trade2
intratrade
fta
tradepartner
finglobalization
govtspending
realexchrate
structure
commoditydummy
oil
ito
percapitadifference
gdpproduct
population
distance

Obs
630
630
630
630
629
630
630
630
630
630
630
630
630
630
630
630
630
630

Mean
0.110
0.113
-3.239
-2.805
-2.396
0.110
-0.957
-1.395
-3.002
-2.742
-1.580
0.216
-0.003
1.298
3.701
10.258
2.783
3.831

Std. Dev.
0.265
0.316
0.720
0.739
1.300
0.258
0.637
0.458
0.656
0.666
0.577
0.412
0.569
1.834
0.492
0.886
0.788
0.380

Min
-0.591
0.000
-6.392
-5.903
-9.572
0.000
-3.193
-2.831
-4.969
-5.004
-3.493
0.000
-3.568
-3.310
0.984
7.634
0.958
2.344

Max
0.807
1.000
-0.960
-0.809
-0.285
1.000
0.802
-0.157
-1.699
-1.161
-0.435
1.000
5.195
5.313
4.349
13.100
5.289
4.297

Notes:
all variables are in logarithms except for bpoutputcorrel, comlang, fta, commoditydummy,oil and ito
Belgium, China, Germany, Hong Kong, Hungary, Israel, Paraguay, Poland, Romania, Switzerland
and South Africa are not included due to missing observations

46

Table 9 GMM-IV and OLS Estimation of Basic Specification with Policy Variables

Method
COEFFICIENT
Constant
europedummy
g7dummy
latinamericadummy
asiadummy
comlang
trade1

II

III

GMM-IV
bpoutputcorrel
0.373***
[0.12]
-0.0121
[0.054]
0.220***
[0.045]
0.102*
[0.053]
0.0649
[0.046]
-0.0132
[0.029]
0.148***
[0.03]

GMM-IV
bpoutputcorrel
0.270***
[0.1]
-0.00572
[0.053]
0.234***
[0.044]
0.116**
[0.052]
0.0925**
[0.043]
-0.0175
[0.029]

GMM-IV
bpoutputcorrel
0.102
[0.076]
-0.0349
[0.052]
0.266***
[0.039]
0.131***
[0.05]
0.130***
[0.041]
-0.0144
[0.03]

trade2

0.123***
[0.024]

tradepartner
finglobalization
highfinglobalization
lowfinglobalization
govtspending
realexchrate
structure
commoditydummy
oil
Observations
OI Test ( p value)
R-squared
Correlation

0.0266
[0.078]
0.0158
[0.02]
0.0224
[0.025]
0.0868**
[0.04]
-0.00329
[0.015]
-0.0314**
[0.015]
-0.0114
[0.018]
-0.0790***
[0.017]
0.0101
[0.029]
0.0332**
[0.015]
702
0.7309
0.21
0.4703 *

europedummy
g7dummy
latinamericadummy
asiadummy
comlang
trade1

intratrade
fta

Method
COEFFICIENT
Constant

0.064
[0.076]
0.0369*
[0.021]
0.0404*
[0.023]
0.0844**
[0.04]
-0.00194
[0.015]
-0.0286*
[0.015]
-0.0189
[0.018]
-0.0762***
[0.016]
0.0124
[0.029]
0.0314**
[0.014]
702
0.9589
0.23
0.4864*

II

III

OLS
bpoutputcorrel
-0.00336
[0.086]
-0.0116
[0.046]
0.297***
[0.064]
0.185***
[0.053]
0.171***
[0.039]
-0.00399
[0.034]
0.0359**
[0.016]

OLS
bpoutputcorrel
0.00374
[0.083]
-0.00866
[0.046]
0.294***
[0.064]
0.181***
[0.053]
0.170***
[0.039]
-0.00616
[0.034]

OLS
bpoutputcorrel
0.0141
[0.071]
-0.0263
[0.046]
0.287***
[0.063]
0.161***
[0.052]
0.159***
[0.037]
-0.00899
[0.033]

trade2
0.0686***
[0.013]
0.0973
[0.073]
0.00532
[0.019]
0.0382*
[0.022]
0.0970**
[0.04]
-0.00215
[0.015]
-0.0174
[0.015]
-0.014
[0.017]
-0.0720***
[0.016]
0.0216
[0.028]
0.0259*
[0.014]
701
0.8176
0.27
0.5212*

0.0395**
[0.016]

intratrade

Observations

0.0965
[0.063]
-0.00824
[0.02]
0.0625***
[0.024]
0.0861**
[0.043]
-0.00257
[0.016]
-0.0385**
[0.018]
-0.0142
[0.014]
-0.0837***
[0.017]
-0.0252
[0.026]
0.0327**
[0.016]
702

0.1
[0.062]
0.00124
[0.021]
0.0638***
[0.024]
0.0855**
[0.043]
-0.00221
[0.015]
-0.0378**
[0.018]
-0.0148
[0.014]
-0.0823***
[0.017]
-0.0211
[0.027]
0.0321**
[0.016]
702

0.0420***
[0.0085]
0.106*
[0.061]
-0.00355
[0.02]
0.0524**
[0.023]
0.0915**
[0.042]
-0.00106
[0.015]
-0.027
[0.018]
-0.014
[0.014]
-0.0769***
[0.017]
-0.00132
[0.027]
0.0278*
[0.016]
701

R-squared
Fstatistics

0.26
F(16,685)=14.98

0.26
F(16,685)=15.09

0.28
F(16,684)=16.61

fta
tradepartner
finglobalization
highfinglobalization
lowfinglobalization
govtspending
realexchrate
structure
commoditydummy
oil

47

Table 10 GMM-IV Diagnostic Tests

Method
Endogenous Variables
Excluded Instruments

Endogeneity Tests:
Durbin-Wu-Hausman F Test
Durbin-Wu-Hausman Chi Square Test
Heteroscedasticity Tests:
Pagan-Hall General Statistics
Overidentification Test:
Sargan Overidentification Test
Hansen-J Overidentification Test
(Orthogonality of Specific Instrument)
C-Statistics
C-Statistics
C-Statistics
First Stage Regression Results:
Shea's Partial R2
F-Test
P-value
Identification/IV relevance Test:
Anderson canon. corr. LR statistic
Underidentification Tests:
Cragg-Donald N*minEval stat.
Weak identification Tests:
Anderson-Rubin Test

I
GMM-IV

II
GMM-IV

III
GMM-IV

trade1
gdpproduct
population
distance

trade2
gdpproduct
population
distance

intratrade
gdpproduct
population
distance

19.79318 F(1,684) P-value = 0.00001

19.74275 Chi-sq(1) P-value = 0.00001

19.49651 F(1,684) P-value = 0.00001

19.45504 Chi-sq(1) P-value = 0.00001

6.31531 F(1,683) P-value = 0.01220

6.42236 Chi-sq(1) P-value = 0.01127

177.486 Chi-sq(170) P-value = 0.3313

189.743 Chi-sq(170) P-value = 0.1428

193.809 Chi-sq(170) P-value = 0.1018

0.627 Chi-sq(2) P-val = 0.7309

finglobalization, govtspending, realexchrate
0.091 Chi-sq(1) P-val = 0.7628
0.013 Chi-sq(1) P-val = 0.9098
0.367 Chi-sq(1) P-val = 0.5446

0.084 Chi-sq(2) P-val = 0.9589

finglobalization, govtspending, realexchrate
0.079 Chi-sq(1) P-val = 0.7782
0.084 Chi-sq(1) P-val = 0.7725
0.044 Chi-sq(1) P-val = 0.8339

0.403 Chi-sq(2) P-val = 0.8176

finglobalization, govtspending, realexchrate
0.349 Chi-sq(1) P-val = 0.5550
0.308 Chi-sq(1) P-val = 0.5792
0.398 Chi-sq(1) P-val = 0.5280

0.3023
74.35
0

0.4057
101.51
0

0.3822
107.2
0

252.649 Chi-sq(3) P-val = 0.0000

365.301 Chi-sq(3) P-val = 0.0000

337.555 Chi-sq(3) P-val = 0.0000

Chi-sq(3) 304.10 P-value 0.0000

Chi-sq(3) 479.22 P-value 0.0000

Chi-sq(3) 433.61 P-value 0.0000

F(3,683)= 10.04 P-val=0.0000

F(3,683)= 10.04 P-val=0.0000

F(3,682)= 10.22 P-val=0.0000

Table 11 Change in Average Band-Pass Filter Output Correlation due to One Standard Deviation Increase in Significant Variables
* denotes statistically significant effects
Model
average bpcorrel (1970-2003)
trade1
trade2
intratrade
finglobalization
structure
govtspending

I
0.116
0.109*

II
0.116

III
0.116

0.091*
0.014
0.045*
0.021*

0.025*
0.044*
0.019*

0.090*
0.023*
0.041*
0.012

48

Table 12 3SLS Estimation of Basic Specification with Policy Variables

Model: I
COEFFICIENT
Constant
europedummy
g7dummy
latinamericadummy
asiadummy
comlang
trade1
fta
tradepartner
finglobalization
govtspending
realexchrate
structure
commoditydummy
oil

1
bpoutputcorrel

2
trade1

3
finglobalization

4
structure

0.239*
[0.14]
-0.0661
[0.061]
0.198***
[0.066]
0.141**
[0.057]
0.134***
[0.05]
0.00363
0.037
0.138***
[0.031]
0.0378
[0.079]
-0.000327
[0.036]
0.0123
[0.078]
-0.0213
[0.019]
-0.0297
[0.02]
-0.105***
[0.035]
0.0182
[0.031]
0.0288*
[0.016]

-1.852***
[0.34]

-0.212
[0.18]

-4.875***
[0.18]

europedummy
g7dummy
latinamericadummy
asiadummy
comlang

0.558***
[0.035]

-0.500***
[0.056]

realexchrate

-0.126**
[0.059]

0.0932**
[0.037]

structure
commoditydummy
oil

630
0.22
0.4688*

0.213***
[0.033]
0.281***
[0.05]
-0.857***
[0.051]
630
0.51

1
bpoutputcorrel

2
trade2

3
finglobalization

4
structure

0.236*
[0.13]
-0.0623
[0.061]
0.209***
[0.065]
0.154***
[0.056]
0.146***
[0.047]
0.0101
[0.037]
0.126***
[0.027]
0.0758
[0.079]
0.0214
[0.038]
0.0429
[0.077]
-0.0214
[0.019]
-0.0261
[0.02]
-0.0885**
[0.035]
0.0216
[0.032]
0.0284*
[0.016]

-4.651***
[0.37]

-0.343*
[0.18]

-5.039***
[0.18]

-0.382***
[0.021]
0.469***
[0.05]
630
0.35

g7dummy
latinamericadummy
asiadummy
comlang

0.288***
[0.038]

tradepartner

0.101
[0.085]

-0.572***
[0.053]

Observations
R-squared
Correlation

630
0.23
0.4791*

finglobalization
govtspending
realexchrate

-0.123**
[0.062]

0.0515
[0.04]

structure
commoditydummy
oil

0.484***
[0.039]
-0.0227
[0.058]
-0.811***
[0.05]
630
0.58

1
bpoutputcorrel

2
intratrade

3
finglobalization

4
structure

0.042
[0.11]
-0.0594
[0.061]
0.225***
[0.064]
0.138**
[0.055]
0.137***
[0.043]
-0.00465
[0.037]
0.0698***
[0.015]
0.0755
[0.078]
-0.0126
[0.035]
0.0483
[0.076]
-0.0193
[0.019]
-0.0229
[0.02]
-0.0886**
[0.035]
0.0294
[0.033]
0.0238
[0.016]

-1.836***
[0.6]

-0.482***
[0.18]

-4.585***
[0.16]

0.314***
[0.017]

-0.0845***
[0.02]

-0.455***
[0.11]

0.177***
[0.038]

0.578***
[0.039]

percapitadifference

population
distance

630
0.27

-0.475***
[0.056]

0.0182***
[0.0066]

gdpproduct

-0.353***
[0.025]
0.190***
[0.051]
630
0.44

1.979***
[0.12]

ito

0.565***
[0.038]

distance

intratrade
fta

percapitadifference

population

630
0.29

-0.203***
[0.031]

0.0691***
[0.0082]

gdpproduct

Model: III
COEFFICIENT
Constant
europedummy

ito

0.583***
[0.039]

distance

finglobalization
govtspending

0.0282***
[0.0071]

population

trade2

tradepartner

0.914***
[0.073]

percapitadifference

Observations
R-squared
Correlation

-0.136***
[0.035]

fta

ito

gdpproduct

Model: II
COEFFICIENT
Constant

Observations
R-squared
Correlation

629
0.27
0.5152*

0.351***
[0.056]
0.764***
[0.087]
-1.110***
[0.094]
629
0.46

-0.436***
[0.022]
0.342***
[0.043]
629
0.34

629
0.31

49

Table 13 Change in Average Band-Pass Filter Output Correlations

due to one standard deviation increase in variables
* denotes statistically significant effects
Model I (average bpoutputcorrel = 0.11)
total effect
effects through
trade1
trade via structure
trade via finglobalization
finglobalization
finglobalization via structure
finglobalization via trade1
structure
structure via finglobalization
structure via trade1

Model II (average bpoutputcorrel = 0.11)

total effect
effects through
trade2
trade2 via structure
trade2 via finglobalization
finglobalization
finglobalization via structure
finglobalization via trade2
structure
structure via finglobalization
structure via trade2

Model III (average bpoutputcorrel = 0.11)

total effect
effects through
intra-industry trade
intratrade via structure
intratrade via finglobalization
finglobalization
finglobalization via structure
finglobalization via intratrade
structure
structure via finglobalization
structure via intratrade

trade1
0.099*

finglobalization
0.006

structure
0.061*

0.058*
0.004*

0.010*
-0.0068*
-0.0007

0.005
-0.0001

0.0005
0.010*
0.021*

0.024*
0.006*

trade2
0.093*

finglobalization
0.020

structure
0.051*

0.006
0.004*

0.009*
-0.0004
-0.001

0.009
-0.0003

0.001
0.013*
0.011*

0.023*
0.001

intratrade
0.091*

finglobalization
0.022

structure
0.051*

0.063*
0.007*

0.018*
-0.014*
-0.005

0.020
-0.001

0.004
0.010*
0.017*

0.019*
0.007*

50

Appendix I Data Sources and Description

Variable
Real GDP

Real Gross Fixed Capital

Formation

Real Household Consumption

Bilateral Exports

Bilateral Imports

Total Exports

Total Imports

Nominal GDP (USD)

Bilateral nominal exports and
imports of product k

Free Trade Area Membership

Agriculture, value added

(% of GDP)

Industry, value added

(% of GDP)

Description
Annual GDP at constant 1990
prices in units of national
currency.
Gross fixed capital formation
formerly gross domestic fixed
investment includes land
improvement, plant, machinery,
equipment purchases and
construction of roads, railways,
schools, offices, hospitals, private
residential dwellings and
commercial and residential
buildings. Data is in constant
local currency.
Household final consumption
expenditure is the market value of
all goods and services, including
durable products purchased by
households. Data is in constant
local currency.
Total merchandise export from
country i to j. Export data is
annual and in nominal terms
converted to US dollars.
Total merchandise import from
country i to j. Import data is
annual and in nominal terms
converted to US dollars.
Total merchandise export from
country i. Export data is annual
and in nominal terms converted to
US dollars.
Total merchandise import from
country i. Import data is annual
and in nominal terms converted to
US dollars.
Annual nominal GDP measured
in US dollars.
Bilateral annual intra-industry
trade between country i and
country j for 81 industries using
four-digit (ISIC) classification.
year that a free trade agreement or
customs union is notified to
GATT/WTO and in effect
Agriculture corresponds to ISIC
divisions 1-5 and includes
forestry, hunting, and fishing as
well as cultivation of crops and
livestock production.
Industry refers to ISIC divisions
10-45 and includes manufacturing
(ISIC divisions 15-37) comprising
value added in mining,
manufacturing, construction,
electricity, water, and gas.

Source
United Nations online available at
http://unstats.un.org/unsd/snaama/SelectionBasicFast.asp.
Data is available for 1970-2003
World Bank World Development Indicators (WDI)
World Economic Outlook (WEO)
Data is available for 1970-2003

World Bank World Development Indicators (WDI)

World Economic Outlook (WEO)
Data is available for 1970-2003

IMF Direction of Trade Statistics

Data is available for 1970-2003

IMF Direction of Trade Statistics

Data is available for 1970-2003

IMF Direction of Trade Statistics

Data is available for 1970-2003

IMF Direction of Trade Statistics

Data is available for 1970-2003

World Bank World Development Indicators (WDI)

Data is available for 1970-2003.
Trade and Production Database by Nicita and Olarreaga
(2001) online available at
http://www.worldbank.org/research/trade. Dataset is
originally constructed from UN Comtrade Database.
Data is available for 1976-99.
World Trade Organization

World Development Indicators

Data is available for 1970-2003

World Development Indicators

Data is available for 1970-2003

51

Services, value added

(% of GDP)

Chinn and Ito Capital Account

Openness Index

Gross private capital flows

(% of GDP)

Agricultural raw materials

exports (% of merchandise
exports)

Food exports (% of
merchandise exports)

Ores and metals exports (% of

merchandise exports)

Services correspond to ISIC

divisions 50-99 and include value
added in wholesale and retail
trade (including hotels and
restaurants), transport, and
government, financial,
professional, and personal
services such as education, health
care, and real estate.
Chinn and Ito focus on the four
basic indicators contained in the
AREAER, namely the existence
of multiple exchange rates,
restrictions on current account
transactions, restrictions on
capital account transactions, and a
variable indicating the
requirement of the surrender of
export proceeds. For controls on
capital transactions, they use the
share of a five-year window that
capital controls were not in effect.
Then, they construct an index for
capital openness by taking
standardized principal component
of four indicators. This index
takes on higher values the more
open the country is to crossborder capital transactions.
Gross private capital flows are the
sum of the absolute values of
direct, portfolio, and other
investment inflows and outflows
recorded in the balance of
payments financial account,
excluding changes in the assets
and liabilities of monetary
authorities and general
government. The indicator is
calculated as a ratio to GDP in
U.S. dollars.
Agricultural raw materials
comprise SITC section 2 (crude
materials except fuels) excluding
divisions 22, 27 (crude fertilizers
and minerals excluding coal,
petroleum and precious stones),
and 28 (metallic-ferous ores and
scrap).
Food comprises the commodities
in SITC sections 0 (food and live
animals), 1 (beverages and
tobacco), 4 (animal and vegetable
oils and fats) and SITC division
22 (oil seeds, nuts and kernels).
Ores and metals comprise the
commodities in SITC sections 27
(crude fertilizer, minerals nes); 28
(metalliferous ores, scrap); and 68
(non-ferrous metals).

World Development Indicators

Data is available for 1970-2003

Menzie Chinns web site online available at

http://www.ssc.wisc.edu/~mchinn/readme_KAOPEN.pdf
Data is available for 1977-2000

World Development Indicators

Data is available for 1970-2003

World Development Indicators

Data is available for 1970-2003

World Development Indicators

Data is available for 1970-2003

World Development Indicators

Data is available for 1970-2003

52

Manufactures exports (% of
merchandise exports)

Manufactures comprise
commodities in SITC sections 5
(chemicals), 6 (basic
manufactures), 7 (machinery and
transport equipment), and 8
(miscellaneous manufactured
goods), excluding division 68
(non-ferrous metals).
General government final
consumption expenditure includes
government current expenditures
for purchases of goods and
services including compensation
of employees as well as most
expenditures on national defense
and security.
Quarterly exchange rates between
country i and US dollar.

World Development Indicators.

CPI

Quarterly Consumer Price Index

Real Oil Price

Nominal annual average crude oil

price deflated by world CPI at
2000
Fuels comprise SITC section 3
(mineral fuels).
Merchandise exports show the
f.o.b. value of goods provided to
the rest of the world valued in
U.S. dollars. Data are in current
U.S. dollars.
Merchandise imports show the
c.i.f. value of goods received from
the rest of the world valued in
U.S. dollars. Data are in current
U.S. dollars.
Distance in kilometers between
capital cities of two countries
Total Population

IMF International Financial Statistics

Data is available for 1970-2003
IMF International Financial Statistics
Data is available for 1970-2003

Government final
consumption expenditure

Nominal Exchange Rate

Fuel exports and imports

(% of merchandise exports)
Merchandise exports

Merchandise imports

Distance
Population
GDP per capita

Real GDP per capita (in US

dollars using 1996 constant prices

World Development Indicators

Data is available for 1970-2003

IMF International Financial Statistics

Data is available for 1970-2003

World Development Indicators

Data is available for 1970-2003
World Development Indicators
Data is available for 1970-2003

World Development Indicators

Data is available for 1970-2003

http://www.indo.com/distance/index.html
World Development Indicators
Data is available for 1970-2003
Penn World Tables 6.1
Data is available for 1970-2003

53