Search index increases once the last global recession

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search index increases once the last global recession was almost in the middle of its duration, and substantially declined (below levels of 0.2) about a year after the beginning of the last global expansion. Also, while the web search index has remained relatively unchanged since 2010, the GWI has indicated signs of moderate economic global weakness at different points in time. These results provide comparative evidence in favor of the timeliness of the GWI to infer global downturns. The contributions of advanced and emerging economies to the total world GDP have exhib- ited sizable changes over the last years. While, for example, the shares of U.S. and Euro Area have declined, the relative economic importance of China and India has surged with time. This evolving composition plays a important role when disentangling the main sources of weakness in global activity. As defined in Equation ( 8 ), the GWI can be easily decomposed into the contributions associated to each economic region. Each of these contributions has two compo- nents. First, the likelihood of falling in a low activity regime, E [ s κ,t ], and second, the economic importance of such likelihood for the world GDP, ω κ,t . The product of these two components helps to identify the main contributors of the degree of weakness of the global economy, either it is high or low. In Figure 6 , we plot the GWI along with its corresponding regional contributions, which are normalized to sum up to one for every time period for ease of interpretation. The figure shows the substantial importance of the U.S. in the deterioration of global economic conditions at the ECB Working Paper Series No 2381 / March 2020 20
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beginning of the last global recession, around the end of 2007. However, in 2008 the relative contribution all the other regions, in particular, advanced economies, starts to rise, yielding a more uniform composition during the middle that global recession, by 2009. This pattern is consistent with a sequential propagation of recessionary shocks. The subsequent recovery, which started around late 2009, and posterior expansion, since 2010, was instead characterized by a degree of global weakness close to zero, where the main contributors were emerging markets. This buoyant global economic stance lasted for about a year. Since 2011 the GWI experienced slight, but sustained, increases, driven by the Japanese economy due to a sequence of unexpected events, such as, an earthquake, a tsunami, and the Fukushima’s nuclear crisis. In 2012 the GWI increased another point, reaching to 0.3, although with a different composition. This time, the main contributor was the Euro Area due to the sovereign debt crisis. During 2015, there was another slight increase in the GWI, which can be mainly attributed to Russia due to the international economic sanctions and oil shocks that were highly detrimental for its financial conditions. Lastly, the decomposition also illustrates the large impact that the recent deterioration in Chinese economic conditions have had on the increasing weakness of the global economy. Overall, the GWI is shown to provide a narrative of events that have led to either
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  • Fall '19
  • Economics, Recession, Late-2000s recession, GWI

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