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Global and regional business cycles. Shocks and propagations

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  • Leif Anders Thorsrud

Abstract

We study the synchronization of real and nominal variables across four different regions of the world, Asia, Europe, North and South America, covering 32 different countries. Employing a FAVAR framework, we distinguish between global and regional demand and supply shocks and document the relative contributions of these shocks to explaining macroeconomic fluctuations and synchronization. Our results support the decoupling hypothesis advanced in recent business cycle studies and yields new insights regarding the causes of business cycle synchronization. In particular, global supply shocks cause more severe activity fluctuations in European and North American economies than in Asian and South American economies, whereas global demand shocks shift activity in the different regions in opposite directions at longer horizons. Furthermore, demand shocks play a larger role than that found in related studies. Finally, only innovations to the Asian activity and price factors have significant spillover effects on shared global factors, demonstrating the growing importance of Asia in the global economy.

Suggested Citation

  • Leif Anders Thorsrud, 2013. "Global and regional business cycles. Shocks and propagations," Working Papers No 3/2013, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    • Handle: RePEc:bny:wpaper:0012
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hideaki Hirata & M. Ayhan Kose & Chris Otrok, "undated". "Regionalization vs. Globalization," Working Paper 164456, Harvard University OpenScholar.
    2. Hilde C. Bjørnland & Leif Anders Thorsrud & Sepideh K. Zahiri, 2016. "Do central banks respond timely to developments in the global economy?," Working Papers No 8/2016, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    3. Bjørnland, Hilde C. & Ravazzolo, Francesco & Thorsrud, Leif Anders, 2017. "Forecasting GDP with global components: This time is different," International Journal of Forecasting, Elsevier, vol. 33(1), pages 153-173.
    4. Hilde C. Bjørnland & Francesco Ravazzolo & Leif Anders Thorsrud, 2015. "Forecasting GDP with global components. This time is different," Working Papers No 1/2015, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    5. Knut Are Aastveit & Hilde C. Bjørnland & Leif Anders Thorsrud, 2015. "What Drives Oil Prices? Emerging Versus Developed Economies," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 30(7), pages 1013-1028, November.
    6. Zeyyad Mandalinci & Haroon Mumtaz, 2019. "Global Economic Divergence and Portfolio Capital Flows to Emerging Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(6), pages 1713-1730, September.
    7. repec:bny:wpaper:0005 is not listed on IDEAS
    8. Hilde C. Bjørnland & Leif Anders Thorsrud, 2013. "Boom or gloom? Examining the Dutch disease in a two-speed economy," Working Papers No 6/2013, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    9. repec:bny:wpaper:0007 is not listed on IDEAS
    10. Shibaev, Sergei S., 2016. "Recession Propagation in Small Regional Economies: Spatial Spillovers and Endogenous Clustering," Queen's Economics Department Working Papers 274695, Queen's University - Department of Economics.
    11. Hilde C. Bjornland & Leif Anders Thorsrud, 2013. "Boom or Gloom? Examining the Dutch Disease in a Two-Speed Economy," CAMA Working Papers 2013-76, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    12. Jorg Breitung & Sandra Eickmeier, 2014. "Analyzing Business and Financial Cycles Using Multi-Level Factor Models," CAMA Working Papers 2014-43, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    13. Sergei S. Shibaev, 2016. "Recession Propagation In Small Regional Economies: Spatial Spillovers And Endogenous Clustering," Working Paper 1369, Economics Department, Queen's University.

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    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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