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Business cycle comovement in the G-7: common shocks or common transmission mechanisms?

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  • Fabio Bagliano
  • Claudio Morana

Abstract

What are the sources of macroeconomic comovement among G-7 countries? Two main candidate explanations may be singled out: common shocks and common transmission mechanisms. In the article it is shown that they are complementary, rather than alternative, explanations. By means of a large-scale Factor Vector Autoregressive (FVAR) model, allowing for full economic and statistical identification of all global and idiosyncratic shocks, it is found that both common disturbances and common transmission mechanisms of global and country-specific shocks account for business cycle comovement in the G-7 countries. Moreover, spillover effects of foreign idiosyncratic disturbances seem to be a less important factor than the common transmission of global or domestic shocks in the determination of international macro-economic comovements.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 42 (2010)
Issue (Month): 18 ()
Pages: 2327-2345

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Handle: RePEc:taf:applec:v:42:y:2010:i:18:p:2327-2345

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Cited by:
  1. Michaelides, Panayotis G. & Papageorgiou, Theofanis, 2012. "On the transmission of economic fluctuations from the USA to EU-15 (1960–2011)," Journal of Economics and Business, Elsevier, vol. 64(6), pages 427-438.
  2. Guglielmo Maria Caporale & Alessandro Girardi, 2012. "Business Cycles, International Trade and Capital Flows: Evidence from Latin America," Discussion Papers of DIW Berlin 1254, DIW Berlin, German Institute for Economic Research.
  3. Leif Anders Thorsrud, 2013. "Global and regional business cycles. Shocks and propagations," Working Paper 2013/08, Norges Bank.
  4. Michaelides, Panayotis G. & Papageorgiou, Theofanis & Vouldis, Angelos T., 2013. "Business cycles and economic crisis in Greece (1960–2011): A long run equilibrium analysis in the Eurozone," Economic Modelling, Elsevier, vol. 31(C), pages 804-816.

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