FRED has data from multiple sources that can help reveal correlations between macroeconomic indicators and policy variables across major economies. For example, the FRED Blog has discussed international comovements in monetary policy before. Today, we dig deeper into economic comovement by looking at recent research from the Richmond Fed.
Researchers Katherine Anderson, Paul Ho, and Nathan Robino used GDP and inflation data from 27 countries between 1981 and 2023 to study how much the U.S. economy moves in parallel with other countries. They found substantial correlations among all countries: “While the comovement is most striking during the Great Recession and COVID-19 periods, it is also visible during the rest of the sample period.”
FRED graphs can fit up to 12 data series at once, but best practice is to use fewer. Our FRED graph above shows the comovement of U.S. GDP annual growth rates (solid dark blue line) and those of the United Kingdom, Japan, and the 19 countries of the Euro Area (various dashed lines) between 1996 and 2024. Simultaneous severe cross-border economic contractions are noticeable during U.S. recessions (shaded areas in the graph), particularly since 2001.
What could help explain these international economic linkages? The Richmond Fed researchers consider two possible channels of economic communication: international trade linkages and global financial networks.
- International trade could transmit demand shocks in one country to all its trading partners.
- Risky asset prices and the risk aversion of investors could also change direction in multiple countries at once, thus creating a global financial cycle.
- Both commercial trade and financial markets may simultaneously combine to influence economic conditions across the world.
How this graph was created: Search FRED for and select “Real Gross Domestic Product for United States.” Click on the “Edit Graph” button and select the “Add Line” tab. Search for and add “Real Gross Domestic Product for United Kingdom (DISCONTINUED).” Repeat the last step to add “Real Gross Domestic Product for Japan” and “Real Gross Domestic Product for Euro Area (19 Countries)” to the graph. Next, use the “Edit Lines” tab to select each of the four graph lines from the dropdown menu and change the units to “Percent Change from Year Ago” and modify the frequency to “Annual.” Lastly, use the “Format” tab to customize each line style.
Suggested by Ethan Hunt and Diego Mendez-Carbajo.