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Deconstructing the International Business Cycle

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  • International Monetary Fund

Abstract

The 2008 crisis underscored the interconnectedness of the international business cycle, with U.S. shocks leading to the largest global slowdown since the 1930s. We estimate spillover effects across major advanced country regions in a structural VAR (SVAR) using pre-crisis data. Our new method freely estimates the contemporaneous correlation matrix for underlying shocks in the VAR and (uniquely, to our knowledge) the associated uncertainty. Our results suggest that the international business cycle is largely driven by U.S. financial shocks with a significant impact from global shocks, mainly reflecting commodity prices. Other advanced economic regions play a much smaller and regional role in growth spillovers. Our findings are consistent with the emerging evidence on the current crisis

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/239.

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Length: 28
Date of creation: 01 Oct 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/239

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Postal: International Monetary Fund, Washington, DC USA
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Related research

Keywords: Spillovers; Developed countries; Economic growth; Economic models; business cycle; real gdp; correlation; standard errors; statistics; correlations; gdp growth; equation; bootstrap; covariance; business cycles; statistic; standard deviations; causation; time series; econometrics; statistical tests; standard deviation; gdp deflator; equations; growth rates; statistical techniques; simultaneous equation; growth rate; asymptotic distribution; confidence intervals; probability; logarithm; business cycle dynamics;

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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. Rania Antonopoulos & Kijong Kim & Tom Masterson & Ajit Zacharias, 2010. "Investing in Care: A Strategy for Effective and Equitable Job Creation," Economics Working Paper Archive wp_610, Levy Economics Institute.
  3. Leif Anders Thorsrud, 2013. "Global and regional business cycles. Shocks and propagations," Working Paper 2013/08, Norges Bank.

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