Global Pulse: How Major Economies Steer the Rhythm of World GDP (original) (raw)

9 Pages Posted: 24 Jul 2023

Lina Thomas

Stockholm School of Economics; Harvard University, Department of Economics

Date Written: July 16, 2023

Abstract

In this Global VEC study, we assess major economies' global influence through forecast error variance decomposition of real output growth. We find that the US has the greatest impact on an average foreign economy (9.8%), primarily via equity markets and interest rates. It is followed by the Euro Area (2.7%), driven by nominal short-term interest rates, China (2.2%), via GDP changes, the UK (2.1%) through equity markets, and Japan (1.4%). This influence is particularly pronounced in economies with high financial and trade openness, advanced economies, and geographically proximate regions, except for the US, which casts a broad influence globally.

Keywords: Global VEC, global impact, globalization, US, China, UK, euro area, Japan

JEL Classification: E44, E52, F41, F44, F62, G15

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