What Ties Us Together?  Explaining Synchronized GDP Volatility

Ductor Gómez, Lorenzo; Leiva-León, Danilo; López Artero, Javier Adrián

doi:10.29412/res.wp.2026.10

Working Paper

What Ties Us Together? Explaining Synchronized GDP Volatility

Abstract: Amid heightened policy uncertainty, understanding the drivers of global macroeconomic instability becomes increasingly critical. This paper studies the determinants of output volatility synchronization using data for 42 economies worldwide. We construct a bilateral time-varying index of volatility synchronization and infer its drivers using Bayesian model averaging, complemented by weighted average least squares (WALS) and least absolute shrinkage and selection operator (LASSO) regression. We find that differences in total factor productivity, interest rate, and fiscal policy volatility robustly explain cross-country synchronization, with nuances between developed and developing countries. Overall, the results highlight the role of technological divergence and macroeconomic policy uncertainty in shaping the international co-movement of output volatility.

JEL Classification: C23; E32; F44;

https://doi.org/10.29412/res.wp.2026.10