An Interlinkage of macroeconomic Activities Among Advanced and Emerging Economies: An Empirical Analysis

Abstract

Employing the generalized impulse response function of the VAR model, this paper attempts to evaluate the interlinkage of macroeconomic activities among advanced (the US, Japan and Germany) and emerging economies (China, India and Russia). We also developed two alternative models by adding some macroeconomic variables to check robustness of empirical findings. Study specifically attempts look at two questions; what extent both emerging and advanced economies are interlinked with each other? Whether interlinkage among them is positive or negative or both over time? The study finds that macroeconomic activities of both advanced and emerging countries are significantly interlinked at a higher extent. Further, the interlinked is positive and significant in the initial period but negative in the longer horizon. These empirical findings are robust.