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Ties that bind: bilateral trade's role in synchronizing business cycles

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  • Ananth Ramanarayanan

Abstract

For most of the past year, economies in all parts of the world have been weakening--from outright recessions in the U.S. and parts of Europe to sharply slower growth in China, India and other emerging economies. The pattern provides the latest example of international business-cycle synchronization--the tendency for countries to experience macroeconomic fluctuations of similar timing and magnitude. ; While today's synchronization isn't unusual, it raises questions about the forces that transmit economic fluctuations from one country to another. An important factor to consider is international trade. Over long periods of time, countries with deeper trade ties are more closely synchronized. This occurs even though trade with any particular partner makes up a fairly small part of economic activity in most countries.

Suggested Citation

  • Ananth Ramanarayanan, 2009. "Ties that bind: bilateral trade's role in synchronizing business cycles," Economic Letter, Federal Reserve Bank of Dallas, vol. 4(jan).
  • Handle: RePEc:fip:feddel:y:2009:i:jan:n:v.4no.1
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    File URL: http://dallasfed.org/assets/documents/research/eclett/2009/el0901.pdf
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    Cited by:

    1. Julian di Giovanni & Andrei A. Levchenko, 2010. "Putting the Parts Together: Trade, Vertical Linkages, and Business Cycle Comovement," American Economic Journal: Macroeconomics, American Economic Association, pages 95-124.
    2. Miguel Ramirez, 2011. "Remittance Flows and Economic Growth in Mexico: A Single Break Unit Root and Cointegration Analysis, 1970-2009," Working Papers 1106, Trinity College, Department of Economics.

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    Keywords

    International trade ; Business cycles;

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