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Determinants of Business Cycle Comovement: A Robust Analysis

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  • Marianne Baxter
  • Michael A. Kouparitsas

Abstract

This paper investigates the determinants of business cycle comovement between countries. Our dataset includes over 100 countries, both developed and developing. We search for variables that are robust' in explaining comovement, using the approach of Leamer (1983). Variables considered are (i) bilateral trade between countries; (ii) total trade in each country; (iii) sectoral structure; (iv) similarity in export and import baskets; (v) factor endowments; and (vi) gravity variables. We find that bilateral trade is robust. However, two variables that the literature has argued are important for business cycles industrial structure and currency unions are found not to be robust.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10725.

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Date of creation: Sep 2004
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Publication status: published as Baxter, Marianne and Michael A. Kouparitsas. "Determinants Of Business Cycle Comovement: A Robust Analysis," Journal of Monetary Economics, 2005, v52(1,Jan), 113-157.
Handle: RePEc:nbr:nberwo:10725

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