Jon Faust
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Breaks in the variability and co-movement of G-7 economic growth

Authors: Doyle, Brian M.; Faust, Jon

Source: Review of Economics and Statistics, 7(4), Nov. 2005, 721-740.

Abstract: This paper investigates breaks in the standard deviation, covariance, and correlation of GDP growth of the G-7 economies. We replicate the earlier finding of a sharp fall in the standard deviation of U.S. growth in the early 1980s and show that this fall is common to at least 5 of the G-7 economies. Despite claims that rising integration among these economies has increased output correlations among them, we find no clear evidence of an increase in correlation of growth rates. This result is true even for the correlation of growth of the U.S. and Canada, which have seen a tremendous increase in bilateral trade shares, and for the correlation of growth among members of the euro area in the G-7.

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