Appendix: Description of data used in the VAR3
Baxter, M., and M. Kouparitsas, 2004, “Determinants of Business Cycle Comovement: A Robust Analysis,” NBER Working Paper No. 10725 (Cambridge, Massachusetts: National Bureau of Economic Research).
Duggar, E., and S. Mitra, 2007, “External Linkages and Contagion Risk in Irish Banks,” IMF Working Paper 07/44 (Washington: International Monetary Fund).
Helbling, T., and T. Bayoumi, 2003, “Are They All in the Same Boat? The 2000–2001 Growth Slowdown and the G-7 Business Cycle Linkages,” IMF Working Paper 03/46 (Washington: International Monetary Fund).
Honohan, P., and B. Walsh, 2002, “Catching Up With the Leaders: The Irish Hare,” Brookings Papers on Economic Activity, Vol. 1, pp. 1–77.
Imbs, J., 2003, “Trade Finance, Specialization, and Synchronization,” IMF Working Paper 03/81 (Washington: International Monetary Fund).
Kose, M.A., C. Otrok, and C.H. Whiteman, 2003, “International Business Cycles: World, Region, and Country-Specific Factors,” American Economic Review, Vol. 93, No 4, pp. 1216–39.
Kose, M.A., E. Prasad, and M.E. Terrones, 2003a, “How Does Globalization Affect the Synchronization of Business Cycles,” IMF Working Paper 03/27 (Washington: International Monetary Fund).
Kose, M.A., E. Prasad, and M.E. Terrones, 2003b, “Volatility and Comovement in a Globalized World Economy: An Empirical Exploration,” IMF Working Paper 03/246 (Washington: International Monetary Fund).
Litterman, R.B., and L. Weiss, 1985, “Money, Real Interest Rates, and Output: A Reinterpretation of Postwar U.S. Data,” Econometrica, Vol. 53, pp. 129–56.
McDermott, C.J., and A. Scott, 2000, “Concordance in Business Cycles,” IMF Working Paper 00/37 (Washington: International Monetary Fund).
Ng, S., and P. Perron, 1995, “Unit Root Tests in ARMA Models with Data-Dependent Methods for the Selection of the Truncation Lag,” Journal of the American Statistical Association, Vol. 90, No 429, pp. 268–81.
Ng, S., and P. Perron, 2001, “Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power,” Econometrica, Vol. 69, pp. 1519–54.
Phillips, P.C.B., 1998, “Impulse Response and Forecast Error Variance Asymptotics in Nonstationary VARs,” Journal of Econometrics, Vol. 83, pp. 21–56.
Stock, J.H., and M.W. Watson, 2003, “Understanding Changes in International Business Cycle Dynamics,” NBER Working Paper No. 9859 (Cambridge, Massachusetts: National Bureau of Economic Research).
Also, examination of the variance decomposition at horizons longer than 8 quarters suggests that the importance of the REER increases further at longer horizons.
4 percent is the typical percentage change (annualized) observed in the REER data.
The actual data used can be found in the accompanying Microsoft Excel file also posted on the web.