International Business Cycle Spillovers
AbstractWe apply Diebold-Yilmaz spillover index methodology to monthly industrial production indices to study business cycle interdependence among G-6 industrialized countries since 1958. The business cycle spillover index fluctuates substantially over time, increasing especially after the 1973-75, 1981-82 and 2001 U.S. recessions. The band within which the spillover index fluctuates has widened since the start of the globalization process in the early 1990s. Our most important result, however, concerns the current state of the world economy: In a matter of four months from September to December 2008, the business cycle spillover index recorded the sharpest increase ever, reaching a record level as of December 2008 (See http://data.economicresearchforum.org/erf/bcspill.aspx?lang=en for updates of the spillover plot). Focusing on directional spillover measures, we show that in the current episode the shocks are mostly originating from the United States and spreading to other industrialized countries. We also show that, throughout the period of analysis, the U.S. (1980s and 2000s) and Japan (1970s and 2000s) have been the major transmitters of shocks among the industrialized countries.
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Bibliographic InfoPaper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 0903.
Length: 33 pages
Date of creation: Mar 2009
Date of revision: Nov 2009
Business Cycles; Spillovers; Industrial Production; Vector Autoregression; Variance Decomposition; Unit Roots; Cointegration;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-13 (All new papers)
- NEP-BEC-2009-04-13 (Business Economics)
- NEP-CBA-2009-04-13 (Central Banking)
- NEP-MAC-2009-04-13 (Macroeconomics)
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