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Comovement in GDP Trends and Cycles Among Trading Partners

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  • Bruce A. Blonigen
  • Jeremy Piger
  • Nicholas Sly

Abstract

It has long been recognized that business cycle comovement is greater between countries that trade intensively with one another. Surprisingly, no one has previously examined the relationship between trade intensity and comovement of shocks to the trend level of output. Contrary to the result for cyclical fluctuations, we find that comovement of shocks to trend levels of real GDP is significantly weaker among countries that trade intensively with one another. We also find that the influence of trade on comovement between shocks to trends has remained stable, or become stronger in recent decades, while the role of trade in generating cyclical comovement has diminished steadily over time. In short, we find that international trade relationships have a substantial impact on comovement of shocks to output trends across countries, and these effects stand in stark contrast to the conventional wisdom regarding cyclical comovement.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18032.

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Date of creation: May 2012
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Handle: RePEc:nbr:nberwo:18032

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Cited by:
  1. Nicholas Sly & Caroline Weber, 2013. "International Fiscal Policy Coordination and GDP Comovement," CESifo Working Paper Series 4358, CESifo Group Munich.

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