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Business Cycle, Currency and Trade, Revisited

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  • Michael J. Artis

    (University of Manchester and CEPR)

  • Toshihiro Okubo

    (Keio University)

Abstract

This paper reports estimates based on long-run data sets for GDP and trade, with three subsamples chosen to reflect the first globalization period, the "bloc economy" period and the second globalization period. The business cycle is identified as the series of deviates from a Hodrick-Prescott filtered trend, and turning points are identified. Cross-correlations of the cyclical deviates are calculated for all the pairs of the 21 countries examined. It is apparent from casual inspection that the business cycle characteristics and the pattern of crosscorrelations in the bloc economy period are different from those found for the two globalization periods whilst there is less difference between the two globalization periods. Estimation is undertaken of equations to explain the pattern of cross correlations in terms of trade and currency union membership. A dummy for the countries that belong to the Eurozone is found to be significant for the period of the first globalization, that is, well before any manifestation of a common Euro-currency is available. By contrast, Asian business cycle co-movement cannot be found.

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Bibliographic Info

Paper provided by Keio/Kyoto Joint Global COE Program in its series Keio/Kyoto Joint Global COE Discussion Paper Series with number 2011-019.

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Length: 25 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:kei:dpaper:2011-019

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References

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  1. Kenen,Peter B., 2000. "The International Economy," Cambridge Books, Cambridge University Press, number 9780521644358.
  2. Toshihiro Okubo, 2008. "Shake Hands or Shake Apart? International Relationship of Japan with Global Blocs," Economie Internationale, CEPII research center, issue 113, pages 35-64.
  3. Inklaar, Robert & Jong-A-Pin, Richard & de Haan, Jakob, 2008. "Trade and business cycle synchronization in OECD countries--A re-examination," European Economic Review, Elsevier, vol. 52(4), pages 646-666, May.
  4. Michael Artis & Toshihiro Okubo, 2011. "Does International Trade Really Lead To Business Cycle Synchronization?—A Panel Data Approach," Manchester School, University of Manchester, vol. 79(2), pages 318-332, 03.
  5. Artis, Michael J & Okubo, Toshihiro, 2008. "Globalization and Business Cycle Transmission," CEPR Discussion Papers 7041, C.E.P.R. Discussion Papers.
  6. Burnside, Craig, 1998. "Detrending and business cycle facts: A comment," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 513-532, May.
  7. Uhlig, H.F.H.V.S. & Ravn, M., 1997. "On Adjusting the H-P Filter for the Frequency of Observations," Discussion Paper 1997-50, Tilburg University, Center for Economic Research.
  8. Regina Kaiser & Agustín Maravall, 2002. "A Complete Model-Based Interpretation of the Hodrick-Prescott Filter: Spuriousness Reconsidered," Banco de España Working Papers 0208, Banco de España.
  9. Agustín Maravall & Ana del Río, 2001. "Time Aggregation and the Hodrick-Prescott Filter," Banco de España Working Papers 0108, Banco de España.
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Cited by:
  1. Michael Artis & Toshihiro Okubo, 2011. "Does International Trade Really Lead to Business Cycle Synchronization?-A panel data approach," Discussion Paper Series DP2011-05, Research Institute for Economics & Business Administration, Kobe University.

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