Measuring Global Economic Interdependence: A Hierarchical Network Approach

Authors

  • David Matesanz Gomez,

    1. Applied Economics Department, University of Oviedo, Oviedo, Spain
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  • Benno Torgler,

    1. The School of Economics and Finance, Queensland University of Technology, Brisbane, Qld, Australia
    2. EBS Universität für Wirtschaft und Recht, EBS Business School, ISBS, Germany
    3. CREMA – Center for Research in Economics, Management and the Arts, Switzerland
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  • Guillermo J. Ortega

    1. Science and Technology Department, Universidad Nacional de Quilmes and CONICET, Argentina
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  • D. Matesanz thanks financial support from the Spanish Ministry of Education through the ‘José Castillejo’ Programme (JC2010-0273). G. Ortega thanks financial support from CONICET PIP (PIP 11420100100261) and Universidad Nacional de Quilmes PUNQ 1000/11.

Abstract

This paper investigates the business cycle co-movement across countries and regions since 1950 as a measure for quantifying the economic interdependence in the ongoing globalisation process. Our methodological approach is based on analysis of a correlation matrix and the networks it contains. Such an approach summarises the interaction and interdependence of all elements, and it represents a more accurate measure of the global interdependence involved in an economic system. Our results show (1) the dynamics of interdependence has been driven more by synchronisation in regional growth patterns than by the synchronisation of the world economy, and (2) world crisis periods dramatically increase the global co-movement in the world economy.

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