Multivariate Business Cycle Synchronization in Small Samples* |
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Authors: | Bertrand Candelon Jan Piplack Stefan Straetmans |
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Affiliation: | 1. Department of Economics, University of Maastricht, Maastricht, The Netherlands (e‐mail: b.candelon@algec.unimaas.nl);2. Rabobank and University of Utrecht, Utrecht, The Netherlands (e‐mail: jan.piplack@rabobank.com);3. Department of Finance, University of Maastricht, Maastricht, The Netherlands (e‐mail: s.straetmans@finance.unimaas.nl) |
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Abstract: | In this paper, we study the degree of business cycle synchronization by means of a small sample version of the Harding and Pagan's [Journal of Econometrics (2006) Vol. 132, pp. 59–79] Generalized Method of Moment test. We show that the asymptotic version of the test gets increasingly distorted in small samples when the number of countries grows large. However, a block bootstrapped version of the test can remedy the size distortion when the time series length divided by the number of countries T/n is sufficiently large. Applying the technique to a number of business cycle proxies of developed economies, we are unable to reject the null hypothesis of a non‐zero common multivariate synchronization index for certain economically meaningful subsets of these countries. |
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Keywords: | C15 F15 |
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