Abstract

Panel discussions on global economic performance and the role of economic shocks, often creates the notion that adverse macroeconomic conditions prevailing in dominant economies such as the U.S, tend to have automatic impact on domestic conditions of other economies around the world. This study examined this perceived automatic contagion phenomenon by verifying how key modeled adverse macroeconomic conditions characterizing the U.S economy influence two macroeconomic indicators within selected advanced economies. Empirical estimation via SUR estimation technique verified this contagion phenomenon to some degree; test results suggests adverse macroeconomic conditions such as economic policy uncertainty, inflation expectations etc. can influence core economic indicators within some economies around the world. This study however, also found that not all cross-border interactions exhibits features of the contagion phenomenon, because some economies examined seem to be relatively insulated from modeled cross-border macroeconomic conditions.

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