International Comovement of Economic Fluctuations: A Spatial Analysis

We consider the comovement of economic volatility across multiple countries. Using spatial models with data from 187 countries over the period of 1960-2007, we find a strong spatial comovement of economic volatility. More interestingly, the effect of geographical proximity on economic volatility comovement is strongest during the period of international shocks (1973-86), but almost disappears over the globalization era (1987-2007). By way of contrast, the influence of trade relations in determining the comovement of economic volatility is significant over 1987-2007.