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Are they All in the Same Boat? the 2000-2001 Growth Slowdown and the G-7 Business Cycle Linkages

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Author Info

  • Thomas Helbling
  • Tamim Bayoumi

Abstract

This paper reviews the international business cycle among Group of Seven (G-7) countries since 1973 from two angles. An examination of business cycle synchronization among these countries using simple descriptive statistics shows that synchronized slowdowns have been the norm rather than the exception and that the slowdown in 2000-2001 largely followed patterns seen in the past. The paper also identifies the international business cycle with an asymptotic dynamic factor model. Two global factors explain roughly 80 percent of the variance in G-7 output gaps at business cycle frequencies. The factor model decomposes the "common part" of national output fluctuations into two factors, one capturing the average G-7 cycle and one that corrects for phase and amplitude differences. We also found some evidence supporting the hypothesis that global shocks were the main force behind the slowdown in 2000-2001.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/46.

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Length: 42
Date of creation: 01 Mar 2003
Date of revision:
Handle: RePEc:imf:imfwpa:03/46

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Related research

Keywords: Economic growth; Economic models; business cycle; correlation; statistics; growth cycles; business cycles; correlations; real gdp; time series; explanatory power; goodness of fit; forecasting; significance levels; growth rates; business cycle fluctuations; growth rate; computation; private consumption; significance level; capital formation; samples; gross fixed capital formation; survey; fixed capital formation; business cycle synchronization; algebra; linear time; correlation analysis; gdps; logarithms; descriptive statistics; business cycle peaks; logarithm; vector autoregression; covariance; factor analysis; monte carlo simulations; cross-country variation; random walk series; gdp growth; linear algebra; random walk; real business cycles; principal components analysis; statistical analysis;

References

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  1. Robert G. King & Charles I. Plosser, 1989. "Real business cycles and the test of the Adelmans," Proceedings, Federal Reserve Bank of San Francisco.
  2. Robin L. Lumsdaine & Eswar Prasad, 1999. "Identifying the Common Component in International Economic Fluctuations," IMF Working Papers 99/154, International Monetary Fund.
  3. Victor Zarnowitz, 1985. "Recent Work on Business Cycles in Historical Perspective: Review of Theories and Evidence," NBER Working Papers 1503, National Bureau of Economic Research, Inc.
  4. Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
  5. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, June.
  6. Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia, 1999. "The Generalized Dynamic Factor Model: Identification and Estimation," CEPR Discussion Papers 2338, C.E.P.R. Discussion Papers.
  7. C. John McDermott & Alasdair Scott, 2000. "Concordance in Business Cycles," IMF Working Papers 00/37, International Monetary Fund.
  8. Harding, Don & Pagan, Adrian, 2001. "Extracting, Using and Analysing Cyclical Information," MPRA Paper 15, University Library of Munich, Germany.
  9. Canova, Fabio, 1993. "Detrending and Business Cycle Facts," CEPR Discussion Papers 782, C.E.P.R. Discussion Papers.
  10. Gregory, Allan W & Head, Allen C & Raynauld, Jacques, 1997. "Measuring World Business Cycles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 677-701, August.
  11. Zarnowitz, Victor, 1985. "Recent Work on Business Cycles in Historical Perspective: A Review of Theories and Evidence," Journal of Economic Literature, American Economic Association, vol. 23(2), pages 523-80, June.
  12. Harvey, A.C. & Trimbur, T.M., 2001. "General Model-based Filters for Extracting Cycles and Trends in Economic Time Series," Cambridge Working Papers in Economics 0113, Faculty of Economics, University of Cambridge.
  13. Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_71-1, June.
  14. Lucrezia Reichlin, 2003. "Factor models in large cross sections of time series," ULB Institutional Repository 2013/10179, ULB -- Universite Libre de Bruxelles.
  15. Artis, Michael J & Kontolemis, Zenon G & Osborn, Denise R, 1997. "Business Cycles for G7 and European Countries," The Journal of Business, University of Chicago Press, vol. 70(2), pages 249-79, April.
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Citations

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Cited by:
  1. Fabio Canova & Matteo Ciccarelli, 2011. "ClubMed Cyclical Fluctuations in the Mediterranean Basin," Working Papers 532, Barcelona Graduate School of Economics.
  2. Domenico Giannone & Michele Lenza & Lucrezia Reichlin, 2008. "Business Cycles in the Euro Area," NBER Working Papers 14529, National Bureau of Economic Research, Inc.
  3. Ossama Mikhail, 2004. "No More Rocking Horses: Trading Business-Cycle Depth for Duration Using an Economy-Specific Characteristic," Macroeconomics 0402026, EconWPA.
  4. Romain Duval & Lukas Vogel, 2008. "Economic resilience to shocks: The role of structural policies," OECD Journal: Economic Studies, OECD Publishing, vol. 2008(1), pages 1-38.
  5. Giannone, Domenico & Lenza, Michele & Reichlin, Lucrezia, 2009. "Business cycles in the euro area," Working Paper Series 1010, European Central Bank.
  6. Herrerias, M.J. & Ordóñez, J., 2014. "If the United States sneezes, does the world need “pain-killers”?," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 159-170.

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