CROSS-COUNTRY INTERDEPENDENCIES IN GROWTH DYNAMICS - A MODEL OF OUTPUT GROWTH IN THE G7 ECONOMIES, 1960-1994

Recently developed methods in time series analysis are employed to stu dy output growth across the G7 economies. The methods accommodate the interdependencies that:exist between economies' growth, and provide th e means for analyzing the sources of shocks to output growth and for e xamining the time profiles of the shock effects. Sophisticated dynamic adjustments in output are identified, due to lagged responses to shoc ks, the feedback of effects across countries, and the differential spe eds of response to different types of shock. Among the shocks consider ed, those to world trade and oil prices are shown to significantly aff ect many countries' output levels. JEL no. C32, E32, F43