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What are the driving forces of international business cycles

Author

Listed:
  • Christopher Otrok

    (University of Virginia)

  • Ayhan Kose

    (IMF)

  • Mario J. Crucini

    (Vanderbilt University and NBER)

Abstract

We examine the driving forces of G-7 business cycles. We decompose national business cycles into common and nation-specific components using a dynamic factor model. We also do this for driving variables found in business cycle models: productivity; measures of fiscal and monetary policy; the terms of trade and oil prices. We find a large common factor in oil prices, productivity, and the terms of trade. Productivity is the main driving force, with other drivers isolated to particular nations or sub-periods. Along these lines, we document shifts in the correlation of the G-7 component of each driver with the overall G-7 cycle.

Suggested Citation

  • Christopher Otrok & Ayhan Kose & Mario J. Crucini, 2009. "What are the driving forces of international business cycles," 2009 Meeting Papers 820, Society for Economic Dynamics.
    • Handle: RePEc:red:sed009:820
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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F00 - International Economics - - General - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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