The Dependence Structure of Macroeconomic Variables in the US

A central role for economic policy involves reducing the incidence of systemic downturns,when key economic variables experience joint extreme events. In this paper,we empirically analyze such asymmetric dependence using two approaches, correlationsand copulas. We document four findings. First, linear correlations and copulasdisagree substantially about the nation’s dependence structure, indicating correlationcomplexity in the US economy. Second, GDP exhibits linear dependence with interestrates and prices, but no extreme dependence with the latter...