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Are they All in the Same Boat? the 2000-2001 Growth Slowdown and the G-7 Business Cycle Linkages

  • Thomas Helbling
  • Tamim Bayoumi

This paper reviews the international business cycle among Group of Seven (G-7) countries since 1973 from two angles. An examination of business cycle synchronization among these countries using simple descriptive statistics shows that synchronized slowdowns have been the norm rather than the exception and that the slowdown in 2000-2001 largely followed patterns seen in the past. The paper also identifies the international business cycle with an asymptotic dynamic factor model. Two global factors explain roughly 80 percent of the variance in G-7 output gaps at business cycle frequencies. The factor model decomposes the "common part" of national output fluctuations into two factors, one capturing the average G-7 cycle and one that corrects for phase and amplitude differences. We also found some evidence supporting the hypothesis that global shocks were the main force behind the slowdown in 2000-2001.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/46.

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Length: 42
Date of creation: 01 Mar 2003
Date of revision:
Handle: RePEc:imf:imfwpa:03/46
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  1. Lucrezia Reichlin, 2003. "Factor models in large cross sections of time series," ULB Institutional Repository 2013/10179, ULB -- Universite Libre de Bruxelles.
  2. Gerhard Bry & Charlotte Boschan, 1971. "Cyclical Analysis of Time Series: Selected Procedures and Computer Programs," NBER Books, National Bureau of Economic Research, Inc, number bry_71-1, December.
  3. Lumsdaine, Robin L. & Prasad, Eswar, 2002. "Identifying the Common Component of International Economic Fluctuations: A New Approach," IZA Discussion Papers 487, Institute for the Study of Labor (IZA).
  4. Victor Zarnowitz, 1984. "Recent Work on Business Cycles in Historical Perspective: Review of Theories and Evidence," NBER Working Papers 1503, National Bureau of Economic Research, Inc.
  5. Harvey, A.C. & Trimbur, T.M., 2001. "General Model-based Filters for Extracting Cycles and Trends in Economic Time Series," Cambridge Working Papers in Economics 0113, Faculty of Economics, University of Cambridge.
  6. Allan W. Gregory & Allen C. Head & Jacques Raynauld, 1994. "Measuring World Business Cycles," Working Papers 902, Queen's University, Department of Economics.
  7. Mario Forni & Marc Hallin & Lucrezia Reichlin & Marco Lippi, 2000. "The generalised dynamic factor model: identification and estimation," ULB Institutional Repository 2013/10143, ULB -- Universite Libre de Bruxelles.
  8. Robert G. King & Charles I. Plosser, 1989. "Real business cycles and the test of the Adelmans," Proceedings, Federal Reserve Bank of San Francisco.
  9. Harding, Don & Pagan, Adrian, 2001. "Extracting, Using and Analysing Cyclical Information," MPRA Paper 15, University Library of Munich, Germany.
  10. C. John McDermott & Alasdair Scott, 2000. "Concordance in Business Cycles," IMF Working Papers 00/37, International Monetary Fund.
  11. Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
  12. Zarnowitz, Victor, 1985. "Recent Work on Business Cycles in Historical Perspective: A Review of Theories and Evidence," Journal of Economic Literature, American Economic Association, vol. 23(2), pages 523-80, June.
  13. Canova, Fabio, 1993. "Detrending and Business Cycle Facts," CEPR Discussion Papers 782, C.E.P.R. Discussion Papers.
  14. Artis, Michael J & Kontolemis, Zenon G & Osborn, Denise R, 1997. "Business Cycles for G7 and European Countries," The Journal of Business, University of Chicago Press, vol. 70(2), pages 249-79, April.
  15. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, December.
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