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International business cycles: What are the facts?

  • Ambler, Steve
  • Cardia, Emanuela
  • Zimmermann, Christian

Modern business cycle theory involves developing models that explain stylized facts. For this strategy to be successful, these facts should be well established. In this paper, we focus on the stylized facts of international business cycles. We use the generalized method of moments and quarterly data from nineteen industrialized countries to estimate pairwise cross-country and within-country correlations of macroeconomic aggregates. We calculate standard errors of the statistics for our unique panel of data and test hypotheses about the relative sizes of these correlations. We find a lower cross-country correlation of all aggregates and especially of consumption than in previous studies. The cross-country correlations of consumption, output and Solow residuals are not significantly different from one another over the whole sample, but there are significant differences in the post-1973 subsample. La théorie moderne du cycle passe par le développement de modèles qui expliquent des faits stylisés. Pour que cette stratégie puisse réussir, ces faits doivent être bien établis. Dans ce papier, nous nous concentrons sur les faits stylisés relatifs aux cycles internationaux. Nous utilisons la méthode des moments généralisés sur des données trimestrielles de 19 pays pour estimer des corrélations entre pays et entre agrégats macroéconomiques. Nous calculons des écarts-types pour les statistiques pour cette unique banque de données et testons des hypothèses concernant les tailles relatives des corrélations. Nous trouvons des corrélations entre pays plus faibles que rapportées précédemment, en particulier pour la consommation. Les corrélations croisées de la consommation, du PIB et des résidus de Solow ne sont pas significativement différentes entre elles sur l'ensemble de l'échantillon, mais il y a des différences significatives dans un sous-échantillon débutant en 1973.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 51 (2004)
Issue (Month): 2 (March)
Pages: 257-276

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Handle: RePEc:eee:moneco:v:51:y:2004:i:2:p:257-276
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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  1. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1987. "International real business cycles," Working Papers 426, Federal Reserve Bank of Minneapolis.
  2. Blackburn, Keith & Ravn, Morten O, 1992. "Business Cycles in the United Kingdom: Facts and Fictions," Economica, London School of Economics and Political Science, vol. 59(236), pages 383-401, November.
  3. Marianne Baxter & Mario J. Crucini, 1994. "Business Cycles and the Asset Structure of Foreign Trade," NBER Working Papers 4975, National Bureau of Economic Research, Inc.
  4. Marianne Baxter, 1995. "International Trade and Business Cycles," NBER Working Papers 5025, National Bureau of Economic Research, Inc.
  5. Stockman, Alan C & Tesar, Linda L, 1995. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," American Economic Review, American Economic Association, vol. 85(1), pages 168-85, March.
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  7. Kollmann, R., 1992. "Consumption, Real Exchange Rates and the Structure of International Asset Markets," Cahiers de recherche 9232, Universite de Montreal, Departement de sciences economiques.
  8. Christian Zimmermann, 1994. "Technology Innovations and the Volatility of Output: An International Perspective," Cahiers de recherche CREFE / CREFE Working Papers 34, CREFE, Université du Québec à Montréal.
  9. Heathcote, Jonathan & Perri, Fabrizio, 2002. "Financial Globalization and Real Regionalization," CEPR Discussion Papers 3268, C.E.P.R. Discussion Papers.
  10. Betts, Caroline & Devereux, Michael B., 1996. "The exchange rate in a model of pricing-to-market," European Economic Review, Elsevier, vol. 40(3-5), pages 1007-1021, April.
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  13. Patrick J. Kehoe & Fabrizio Perri, 2000. "International business cycles with endogenous incomplete markets," Staff Report 265, Federal Reserve Bank of Minneapolis.
  14. Alan C. Stockman, 1987. "Sectoral and National Aggregate Disturbances to Industrial Output in Seven European Countries," NBER Working Papers 2313, National Bureau of Economic Research, Inc.
  15. Ambler, S. & Cardia, E. & Zimmermann, C., 2000. "International Transmission of the Business Cycle in a Multi-Sector Model," Cahiers de recherche 2000-06, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  16. Michael B. Devereux & Allan W. Gregory & Gregor W. Smith, 1990. "Realistic Cross-Country Consumption Correlations in a Two-Country, Equilibrium, Business Cycle Model," Working Papers 774, Queen's University, Department of Economics.
  17. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
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  19. Baxter, Marianne, 1995. "International trade and business cycles," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 35, pages 1801-1864 Elsevier.
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