Title

The Emergence of Temporal Correlations in a Study of Global Economic Interdependence

Document Type

Journal Article

Role

Author

Standard Number

1469-7688

Journal Title

Quantitative Finance

Volume

3

Issue

4

First Page

296

Last Page

305

Publication Date

2003

Abstract

We develop a simple firm-based automaton model for global economic interdependence of countries using modern notions of self-organized criticality and recently developed dynamical renormalization-group methods. 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.

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