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Multivariate Business Cycle Synchronization in Small Samples *
Author(s) -
Candelon Bertrand,
Piplack Jan,
Straetmans Stefan
Publication year - 2009
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/j.1468-0084.2009.00556.x
Subject(s) - multivariate statistics , business cycle , econometrics , null hypothesis , synchronization (alternating current) , mathematics
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.