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The G7 business cycle in a globalized world

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  • Carstensen, K.
  • Salzmann, L.

Abstract

Using a factor structural VAR for 14 countries out of the G20 group, we document that output innovations originating outside the G7 account for shares of 10 to almost 25 percent in the business cycle fluctuations of G7 GDP growth. Using auxiliary regressions, we additionally find that these innovations contribute noticeably, relative to G7 output innovations, to short-term fluctuations in important other national G7 variables such as employment, the current account balance, inflation, and inflation volatility, and in global macroeconomic indicators like the oil price, world stock market returns and exchange rate volatility. The results indicate that in a globalized world spillovers from emerging markets and industrial countries other than the G7 play a relevant role for major aspects of the G7 and world business cycle.

Suggested Citation

  • Carstensen, K. & Salzmann, L., 2017. "The G7 business cycle in a globalized world," Journal of International Money and Finance, Elsevier, vol. 73(PA), pages 134-161.
  • Handle: RePEc:eee:jimfin:v:73:y:2017:i:pa:p:134-161
    DOI: 10.1016/j.jimonfin.2017.02.002
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    Cited by:

    1. Salzmann, Leonard, 2018. "China's Economic Slowdown and International Inflation Dynamics," EconStor Preprints 176757, ZBW - German National Library of Economics.

    More about this item

    Keywords

    G7; International business cycle transmission; Factor structural VAR;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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