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Measuring the Dynamics of Global Business Cycle Connectedness

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  • Francis X. Diebold

    ()
    (Department of Economics, University of Pennsylvania)

  • Kamil Yilmaz

    ()
    (Department of Economics, Koc University)

Abstract

Using a connectedness-measurement technology fundamentally grounded in modern network theory, we measure real output connectedness for a set of six developed countries, 1962-2010. We show that global connectedness is sizable and time-varying over the business cycle, and we study the nature of the time variation relative to the ongoing discussion about the changing nature of the global business cycle. We also show that connectedness corresponding to transmissions to others from the United States and Japan is disproportionately important.

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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 13-070.

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Length: 29 pages
Date of creation: 17 Dec 2013
Date of revision:
Handle: RePEc:pen:papers:13-070

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Keywords: Synchronization; coupling; de-coupling; network; G-7; real activity; industrial production; globalization;

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  1. Dufour, Jean-Marie & Taamouti, Abderrahim, 2010. "Short and long run causality measures: Theory and inference," Journal of Econometrics, Elsevier, Elsevier, vol. 154(1), pages 42-58, January.
  2. Francis X. Diebold & Kamil Yilmaz, 2011. "On the Network Topology of Variance Decompositions: Measuring the Connectedness of Financial Firms," NBER Working Papers 17490, National Bureau of Economic Research, Inc.
  3. Francis X. Diebold & Kamil Yilmaz, 2008. "Measuring financial asset return and volatility spillovers, with application to global equity markets," Working Papers 08-16, Federal Reserve Bank of Philadelphia.
  4. Pesaran, M. H. & Shin, Y., 1997. "Generalised Impulse Response Analysis in Linear Multivariate Models," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9710, Faculty of Economics, University of Cambridge.
  5. Margaret M. McConnell & Gabriel Perez Quiros, 1997. "Output fluctuations in the United States: what has changed since the early 1980s?," Research Paper, Federal Reserve Bank of New York 9735, Federal Reserve Bank of New York.
  6. Diebold, Francis X. & Yilmaz, Kamil, 2012. "Better to give than to receive: Predictive directional measurement of volatility spillovers," International Journal of Forecasting, Elsevier, Elsevier, vol. 28(1), pages 57-66.
  7. S. Borağan Aruoba & Francis X. Diebold & M. Ayhan Kose & Marco E. Terrones, 2010. "Globalization, the Business Cycle, and Macroeconomic Monitoring," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER International Seminar on Macroeconomics 2010, pages 245-286 National Bureau of Economic Research, Inc.
  8. Brian M. Doyle & Jon Faust, 2005. "Breaks in the Variability and Comovement of G-7 Economic Growth," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 721-740, November.
  9. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, Elsevier, vol. 74(1), pages 119-147, September.
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