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Financial Globalization and Real Regionalization Author info | Abstract | Publisher info | Download info | Related research | Statistics Jonathan Heathcote () (Department of Economics, Georgetown University )
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Over the period 1972-1986, the U.S. business cycle was strongly correlated with the business cycle in the rest of the industrialized world. Over the period 1986-2000, international co-movement was much weaker (real regionalization). At the same time, U.S. international asset trade has increased significantly (financial globalization). We first document these phenomena in detail and then argue that they are related. In particular, we present a model in which financial globalization occurs endogenously in response to less correlated real shocks. Financial globalization, by enhancing cross-border capital flows, further reduces the international correlations in GDP and factor supplies. We find that both less correlated shocks and the endogenous change in international financial markets are needed to quantitatively account for the observed changes in the international business cycle.
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Paper provided by Georgetown University, Department of Economics in its series Working Papers with number
gueconwpa~03-03-20.
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Date of creation: 03 Sep 2003Date of revision:
Handle: RePEc:geo:guwopa:gueconwpa~03-03-20Contact details of provider: Postal: Georgetown University Department of Economics Washington, DC 20057-1036 Phone: 202-687-6074 Fax: 202-687-6102 Email: Web page: http://econ.georgetown.edu/
Order Information: Postal: Marcia Suss Administrative Officer Georgetown University Department of Economics Washington, DC 20057-1036 Email: Web: http://econ.georgetown.edu/
For technical questions regarding this item, or to correct its listing, contact: (Marcia Suss).
Keywords: International business cycles ; International diversification ; Financial integration ; Comovement ; Other versions of this item:
Article Paper Heathcote, J. & Perri, F., 2001.
"Financial Globalization and Real Regionalization ,"
New York University, Leonard N. Stern School Finance Department Working Paper Seires
01-11, New York University, Leonard N. Stern School of Business-.
Jonathan Heathcote & Fabrizio Perri, 2002.
"Financial Globalization and Real Regionalization ,"
NBER Working Papers
9292, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted) Heathcote, Jonathan & Perri, Fabrizio, 2002.
"Financial Globalization and Real Regionalization ,"
CEPR Discussion Papers
3268, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted) Heathcote, Jonathan & Perri, Fabrizio, 2001.
"Financial Globalization and Real Regionalization ,"
Working Papers
01-05, Duke University, Department of Economics.
[Downloadable!] Jonathan Heathcote & Fabrizio Perri, 2001.
"Financial Globalization and Real Regionalization ,"
Working Papers
01-11, New York University, Leonard N. Stern School of Business, Department of Economics.
[Downloadable!] Find related papers by JEL classification: F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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"International evidence on the historical properties of business cycles ,"
Staff Report
145, Federal Reserve Bank of Minneapolis.
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"International Evidence of the Historical Properties of Business Cycles ,"
American Economic Review ,
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[Downloadable!] (restricted) Gian Maria Milesi-Ferretti & Philip R. Lane, 1999.
"The External Wealth of Nations - Measures of Foreign Assets and Liabilities for Industrial and Developing Countries ,"
IMF Working Papers
99/115, International Monetary Fund.
Other versions:
Lane, Philip R. & Milesi-Ferretti, Gian Maria, 1999.
"The External Wealth of Nations: Measures of Foreign Assets and Liabilities for Industrial and Developing Countries ,"
CEPR Discussion Papers
2231, C.E.P.R. Discussion Papers.
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"THE EXTERNAL WEALTH OF NATIONS: Measures of Foreign Assets and Liabilities For Industrial and Developing Countries ,"
Trinity Economics Papers
20014, Trinity College Dublin, Department of Economics.
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"THE EXTERNAL WEALTH OF NATIONS: Measures of Foreign Assets and Liabilities For Industrial and Developing Countries ,"
CEG Working Papers
20012, Trinity College Dublin, Department of Economics.
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"The external wealth of nations: measures of foreign assets and liabilities for industrial and developing countries ,"
Journal of International Economics ,
Elsevier, vol. 55(2), pages 263-294, December.
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"Dynamic Conditional Correlation - A Simple Class of Multivariate GARCH Models ,"
University of California at San Diego, Economics Working Paper Series
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Kristin Forbes & Roberto Rigobon, 1999.
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"Business Cycles and the Asset Structure of Foreign Trade ,"
International Economic Review ,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 821-54, November.
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Other versions:
Baxter, M. & Crucini, M., 1991.
"Business Cycles and the Asset Structure of Foreign Trade ,"
RCER Working Papers
316, University of Rochester - Center for Economic Research (RCER).
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"Business Cycles and the Asset Structure of Foreign Trade ,"
NBER Working Papers
4975, National Bureau of Economic Research, Inc.
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"Business cycles and the asset structure of foreign trade ,"
Discussion Paper / Institute for Empirical Macroeconomics
59, Federal Reserve Bank of Minneapolis.
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"Financial autarky and international business cycles ,"
Journal of Monetary Economics ,
Elsevier, vol. 49(3), pages 601-627, April.
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"Macroeconomic Effects of Nominal Exchange Rate Regimes: New Insights into the Role of Price Dynamics ,"
CEPR Discussion Papers
4487, C.E.P.R. Discussion Papers.
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"Risk-Taking, Global Diversification, and Growth ,"
NBER Working Papers
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"Risk-taking, global diversification, and growth ,"
Discussion Paper / Institute for Empirical Macroeconomics
61, Federal Reserve Bank of Minneapolis.
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"Risk-Taking, Global Diversification, and Growth ,"
CEPR Discussion Papers
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"Risk-Taking, Global Diversification, and Growth ,"
Center for International and Development Economics Research (CIDER) Working Papers
C93-016, University of California at Berkeley.
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"Risk-Taking, Global Diversification, and Growth ,"
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"Linkages Among Asset Markets in the United States - Tests in a Bivariate GARCH Framework ,"
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99/158, International Monetary Fund.
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"International Business Cycles with Endogenous Incomplete Markets ,"
Econometrica ,
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"International Real Business Cycles ,"
Journal of Political Economy ,
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page .
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