Advanced Search
MyIDEAS: Login to save this paper or follow this series

Financial Globalization and Real Regionalization

Contents:

Author Info

  • Jonathan Heathcote
  • Fabrizio Perri

Abstract

Over the period 1972-1986, the correlations of GDP, employment and investment between the United States and an aggregate of Europe, Canada and Japan were respectively 0.76, 0.66, and 0.63. For the period 1986 to 2000 the same correlations were much lower: 0.26, 0.03 and -0.07 (real regionalization). At the same time, U.S. international asset trade has significantly increased. For example, between 1972 and 1999, United States gross FDI and equity assets in the same group of countries rose from 4 to 23 percent of the U.S. capital stock (financial globalization). We document that the correlation of real shocks between the U.S. and the rest of the world has declined. We then present a model in which international financial market integration occurs endogenously in response to less correlated shocks. Financial integration further reduces the international correlations in GDP and factor supplies. We find that both less correlated shocks and endogenous financial market development are needed to account for all the changes in the international business cycle.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w9292.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9292.

as in new window
Length:
Date of creation: Oct 2002
Date of revision:
Publication status: published as Heathcote, Jonathan and Fabrizio Perri. "Financial Globalization And Real Regionalization," Journal of Economic Theory, 2004, v119(1,Nov), 207-243.
Handle: RePEc:nbr:nberwo:9292

Note: EFG IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Philip Lane & Gian Maria Milesi-Ferretti, 2001. "THE EXTERNAL WEALTH OF NATIONS: Measures of Foreign Assets and Liabilities For Industrial and Developing Countries," Trinity Economics Papers 20014, Trinity College Dublin, Department of Economics.
  2. David K. Backus & Patrick J. Kehoe, 1992. "International Evidence on the Historical Properties of Business Cycles," Working Papers 92-5, New York University, Leonard N. Stern School of Business, Department of Economics.
  3. Patrick J. Kehoe & Fabrizio Perri, 2000. "International Business Cycles with Endogenous Incomplete Markets," NBER Working Papers 7870, National Bureau of Economic Research, Inc.
  4. Obstfeld, Maurice, 1994. "Risk-Taking, Global Diversification, and Growth," American Economic Review, American Economic Association, vol. 84(5), pages 1310-29, December.
  5. Sanford Grossman & Oliver Hart, 1978. "A theory of competitive equilibrium in stock market economies," Special Studies Papers 115, Board of Governors of the Federal Reserve System (U.S.).
  6. David Backus & Patrick J. Kehoe & Finn E. Kydland, 1992. "Dynamics of the Trade Balance and the Terms of Trade: The S-Curve," NBER Working Papers 4242, National Bureau of Economic Research, Inc.
  7. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1987. "International real business cycles," Working Papers 426, Federal Reserve Bank of Minneapolis.
  8. Cantor, Richard & Mark, Nelson C, 1988. "The International Transmission of Real Business Cycles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(3), pages 493-507, August.
  9. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
  10. Harold L. Cole & Maurice Obstfeld, 1989. "Commodity Trade and International Risk Sharing: How Much Do Financial Markets Matter?," NBER Working Papers 3027, National Bureau of Economic Research, Inc.
  11. Martin, Philippe & Rey, Hélène, 1999. "Financial Super-Markets: Size Matters for Asset Trade," CEPR Discussion Papers 2232, C.E.P.R. Discussion Papers.
  12. Heathcote, Jonathan & Perri, Fabrizio, 2002. "Financial autarky and international business cycles," Journal of Monetary Economics, Elsevier, vol. 49(3), pages 601-627, April.
  13. Baxter, Marianne & Crucini, Mario J, 1995. "Business Cycles and the Asset Structure of Foreign Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 821-54, November.
  14. Marianne Baxter & Urban J. Jermann, 1995. "The International Diversification Puzzle is Worse Than You Think," NBER Working Papers 5019, National Bureau of Economic Research, Inc.
  15. Lucas, Robert Jr., 1982. "Interest rates and currency prices in a two-country world," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 335-359.
  16. Arvanitis, Athanasios V & Mikkola, Anne, 1996. "Asset-Market Structure and International Trade Dynamics," American Economic Review, American Economic Association, vol. 86(2), pages 67-70, May.
  17. Gian-Maria Milesi-Ferretti & Philip R. Lane, 1999. "The External Wealth of Nations," IMF Working Papers 99/115, International Monetary Fund.
  18. Robert Kollmann, 2005. "Macroeconomic effects of nominal exchange rate regimes: new insights into the role of price dynamics," ULB Institutional Repository 2013/7624, ULB -- Universite Libre de Bruxelles.
  19. Lane, Philip & Milesi-Ferretti, Gian Maria, . "External Wealth of Nations," Instructional Stata datasets for econometrics extwealth, Boston College Department of Economics.
  20. Parha Deb & Salim M. Darbar, 1999. "Linkages Among Asset Markets in the United States," IMF Working Papers 99/158, International Monetary Fund.
  21. Tesar, Linda L., 1993. "International risk-sharing and non-traded goods," Journal of International Economics, Elsevier, vol. 35(1-2), pages 69-89, August.
  22. Longin, Francois & Solnik, Bruno, 1995. "Is the correlation in international equity returns constant: 1960-1990?," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 3-26, February.
  23. Maurice Obstfeld, 1986. "International Finance," NBER Working Papers 2077, National Bureau of Economic Research, Inc.
  24. Engle, Robert F, 2000. "Dynamic Conditional Correlation - A Simple Class of Multivariate GARCH Models," University of California at San Diego, Economics Working Paper Series qt56j4143f, Department of Economics, UC San Diego.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Banking globalization and international business cycles
    by Christian Zimmermann in NEP-DGE blog on 2010-09-15 20:26:15
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:9292. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.