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Finance and Synchronization

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  • Saleheen, Jumana
  • Imbs, Jean
  • Cesa-Bianchi, Ambrogio

Abstract

It is well known that the bulk of international financial flows across countries are driven by common shocks. In response to these common shocks, we find that capital tends to flow systematically between the same types of countries, while the discrepancy between GDP growth rates widens. Thus, in the data synchronization falls when financial linkages rise, but only so in response to common shocks. In contrast, financial linkages tend to increase the synchronization of business cycles in response to purely country-specific shocks.

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  • Saleheen, Jumana & Imbs, Jean & Cesa-Bianchi, Ambrogio, 2016. "Finance and Synchronization," CEPR Discussion Papers 11037, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11037
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. International business cycle synchronization: what is the role of financial linkages?
      by bankunderground in Bank Underground on 2016-04-06 11:30:09

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    More about this item

    Keywords

    Business cycle synchronization; Common shocks; Contagion; Financial linkages; Idiosyncratic shocks;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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