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Has globalization increased the synchronicity of international business cycles?

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  • Berge, Travis

Abstract

The past 30 years have been witness to an inexorable change in the degree to which economies are connected internationally. At the same time, the 2007-2008 recession was the first ‘global recession’ in decades. This article explores how international trade and cross-border holdings financial assets impact the synchronization of business cycles internationally. The paper begins by producing chronologies of business cycle turning points for a group of 32 major economies covering 40 years of history. With these chronologies in hand, we document the degree of bilateral business cycle synchronization, relating cross-country differences in synchronization to bilateral trade and financial linkages. The analysis confirms that countries with deep trade linkages tend to experience similar business cycle fluctuations. However, we find no such relationship for financial linkages.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42392.

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Date of creation: 01 Oct 2012
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Handle: RePEc:pra:mprapa:42392

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Keywords: Globalization; international business cycle synchronization;

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  1. Imbs, Jean, 2004. "The Real Effects of Financial Integration," CEPR Discussion Papers 4335, C.E.P.R. Discussion Papers.
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  10. Marianne Baxter & Michael A. Kouparitsas, 2004. "Determinants of Business Cycle Comovement: A Robust Analysis," NBER Working Papers 10725, National Bureau of Economic Research, Inc.
  11. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2006. "The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004," CEPR Discussion Papers 5644, C.E.P.R. Discussion Papers.
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  13. Engel, Charles M & Rose, Andrew K, 2001. "Currency Unions and International Integration," CEPR Discussion Papers 2659, C.E.P.R. Discussion Papers.
  14. Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March.
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