National economies are increasingly moving in sync and responding to the same booms and busts as a result of near-instantaneous communications and interdependent global supply chains. This is a sharp change from much of the 21st century, when economies were primarily affected by economic shocks in neighboring countries.

That’s what we found in a paper published in the journal Economic Letters, in which we calculated measures of economic correlation using data on gross domestic product for 70 countries over the past 60 years. Along with fellow economic scholars Yoonseon Han and David Lindequist, we found that physical distance was indeed less important than it used to be, particularly with regard to how interconnected countries are to one another.

Specifically, we measured the extent to which countries have found their business cycles — the traditional boom-bust intervals of economic performance — in sync. For example, when there is a positive shock to production in Germany, to what extent does this affect incomes in the United States?

We were interested in whether the relationship between distance and economic correlation........

© The Conversation