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Global and regional business cycles. Shocks and propagations

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  • Leif Anders Thorsrud

    ()
    (BI Norwegian Business School and Norges Bank)

Abstract

We study the synchronization of real and nominal variables across four different regions of the world, Asia, Europe, North and South America, covering 32 different countries. Employing a FAVAR framework, we distinguish between global and regional demand and supply shocks and document the relative contributions of these shocks to explaining macroeconomic fluctuations and synchronization. Our results support the decoupling hypothesis advanced in recent business cycle studies and yields new insights regarding the causes of business cycle synchronization. In particular, global supply shocks cause more severe activity fluctuations in European and North American economies than in Asian and South American economies, whereas global demand shocks shift activity in the different regions in opposite directions at longer horizons. Furthermore, demand shocks play a larger role than that found in related studies. Finally, only innovations to the Asian activity and price factors have significant spillover effects on shared global factors, demonstrating the growing importance of Asia in the global economy.

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File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2013/WP-201308/
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Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2013/08.

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Length: 34 pages
Date of creation: 27 Feb 2013
Date of revision:
Handle: RePEc:bno:worpap:2013_08

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Keywords: Business cycles; Factor model; Globalization; International macro;

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  1. Kei-Mu Yi & M. Ayhan Kose, 2005. "Can the Standard International Business Cycle Model Explain the Relation Between Trade and Comovement?," IMF Working Papers 05/204, International Monetary Fund.
  2. Maurice Obstfeld and Kenneth Rogoff., 2001. "Global Implications of Self-Oriented National Monetary Rules," Center for International and Development Economics Research (CIDER) Working Papers C01-120, University of California at Berkeley.
  3. Christopher Otrok & Ayhan Kose & Mario J. Crucini, 2009. "What are the driving forces of international business cycles," 2009 Meeting Papers 820, Society for Economic Dynamics.
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  7. Knut Are Aastveit & Hilde C. Bjørnland & Leif Anders Thorsrud, 2011. "The world is not enough! Small open economies and regional dependence," Working Papers 0005, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
  8. Michael B. Devereux & James Yetman, 2010. "Leverage Constraints and the International Transmission of Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 71-105, 09.
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  16. Steve Ambler & Emanuela Cardia & Christian Zimmermann, 1998. "International Transmission of the Business Cycle in a Multi-Sectoral Model," Cahiers de recherche CREFE / CREFE Working Papers 60, CREFE, Université du Québec à Montréal.
  17. Juan F. Rubio-Ramírez & Daniel F.Waggoner & Tao Zha, 2008. "Structural vector autoregressions: theory of identification and algorithms for inference," Working Paper 2008-18, Federal Reserve Bank of Atlanta.
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Cited by:
  1. Hilde C. Bjørnland & Leif Anders Thorsrud, 2013. "Boom or gloom? Examining the Dutch disease in a two-speed economy," Working Papers 0015, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
  2. Knut Are Aastveit & Hilde C. Bjoernland, 2013. "What drives oil prices? Emerging versus developed economies," CAMA Working Papers 2013-11, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  3. HIRATA Hideaki & Ayhan KOSE & Christopher OTROK, 2013. "Regionalization vs. Globalization," Discussion papers 13004, Research Institute of Economy, Trade and Industry (RIETI).
  4. Emilio Espino & Julian Kozlowski & Juan M. Sánchez, 2013. "Regionalization vs. globalization," Working Papers 2013-002, Federal Reserve Bank of St. Louis.
  5. Knut Are Aastveit & Hilde C. Bjørnland & Leif Anders Thorsrud, 2011. "The world is not enough! Small open economies and regional dependence," Working Papers 0005, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.

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