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Globalization, the Business Cycle, and Macroeconomic Monitoring

In: NBER International Seminar on Macroeconomics 2010

Author

Listed:
  • S. Borağan Aruoba
  • Francis X. Diebold
  • M. Ayhan Kose
  • Marco E. Terrones

Abstract

We propose and implement a framework for characterizing and monitoring the global business cycle. Our framework utilizes high-frequency data, allows us to account for a potentially large amount of missing observations, and is designed to facilitate the updating of global activity estimates as data are released and revisions become available. We apply the framework to the G-7 countries and study various aspects of national and global business cycles, obtaining three main results. First, our measure of the global business cycle, the common G-7 real activity factor, explains a significant amount of cross-country variation and tracks the major global cyclical events of the past forty years. Second, the common G-7 factor and the idiosyncratic country factors play different roles at different times in shaping national economic activity. Finally, the degree of G-7 business cycle synchronization among country factors has changed over time.
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Suggested Citation

  • S. Borağan Aruoba & Francis X. Diebold & M. Ayhan Kose & Marco E. Terrones, 2010. "Globalization, the Business Cycle, and Macroeconomic Monitoring," NBER Chapters,in: NBER International Seminar on Macroeconomics 2010, pages 245-286 National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:12198
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    References listed on IDEAS

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    1. Sebnem Kalemli-Ozcan & Bent E. Sørensen & Oved Yosha, 2003. "Risk Sharing and Industrial Specialization: Regional and International Evidence," American Economic Review, American Economic Association, vol. 93(3), pages 903-918, June.
    2. Jean Imbs, 2010. "The First Global Recession in Decades," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 58(2), pages 327-354, December.
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    Cited by:

    1. Camacho, Maximo & Martinez-Martin, Jaime, 2015. "Monitoring the world business cycle," Economic Modelling, Elsevier, vol. 51(C), pages 617-625.
    2. Golinelli, Roberto & Parigi, Giuseppe, 2014. "Tracking world trade and GDP in real time," International Journal of Forecasting, Elsevier, vol. 30(4), pages 847-862.
    3. In Choi & Dukpa Kim & Yun Jung Kim & Noh-Sun Kwark, 2016. "A Multilevel Factor Model: Identification, Asymptotic Theory and Applications," Working Papers 1609, Research Institute for Market Economy, Sogang University.
    4. Alessandro Borin & Riccardo Cristadoro & Roberto Golinelli & Giuseppe Parigi, 2012. "Forecasting world output: the rising importance of emerging economies," Temi di discussione (Economic working papers) 853, Bank of Italy, Economic Research and International Relations Area.
    5. S. Boragan Aruoba & Cagri Sarikaya, 2013. "A Real Economic Activity Indicator for Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 13(1), pages 15-29.
    6. Francis X. Diebold & Kamil Yilmaz, 2013. "Measuring the Dynamics of Global Business Cycle Connectedness," PIER Working Paper Archive 13-070, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    7. David Matesanz Gomez & Guillermo J. Ortega & Benno Torgler, 2012. "Synchronization and Diversity in Business Cycles: A Network Approach Applied to the European Union," CREMA Working Paper Series 2012-01, Center for Research in Economics, Management and the Arts (CREMA).

    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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