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Title:The emergence of correlations in studies of global economic inter-dependence and contagion PDF Logo
Authors:Friedman, Eric J.
Johnson, Simon
Landsberg, A. S.
Editors:Claremont Institute for Economic Policy Studies
Issue Date:2003
Series/Report no.:Working paper series // Claremont Institute for Economic Policy Studies 2002-35
Abstract:We construct a simple firm-based automata model for global economic inter-dependence of countries using modern notions of self-organized criticality and recently developed dynamical-renormalization-group methods (e.g., L. Pietronero et al., Phys. Rev. Lett., 72(11):1690 (1994); J. Hasty and K. Wiesenfeld, Phys. Rev. Lett., 81(8):1722, (1998)). We demonstrate how extremely strong statistical correlations can naturally develop between two countries even if the financial interconnections between those countries remain very weak. Potential policy implications of this result are also discussed.
JEL:J1
J2
Document Type:Working Paper
Appears in Collections:Claremont Colleges Working Papers in Economics, Department of Economics, Claremont McKenna College

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