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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. King, Robert G. & Plosser, Charles I., 1994. "Real business cycles and the test of the Adelmans," Journal of Monetary Economics, Elsevier, vol. 33(2), pages 405-438, April.
  2. Andrew C. Harvey & Thomas M. Trimbur, 2003. "General Model-Based Filters for Extracting Cycles and Trends in Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 244-255, May.
  3. Reichlin, Lucrezia, 2002. "Factor Models in Large Cross-Sections of Time Series," CEPR Discussion Papers 3285, C.E.P.R. Discussion Papers.
  4. 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.
  5. C. John McDermott & Alasdair Scott, 2000. "Concordance in Business Cycles," IMF Working Papers 00/37, International Monetary Fund.
  6. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1.
  7. Gregory, Allan W & Head, Allen C & Raynauld, Jacques, 1997. "Measuring World Business Cycles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 677-701, August.
  8. 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.
  9. 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.
  10. Canova, Fabio, 1993. "Detrending and Business Cycle Facts," CEPR Discussion Papers 782, C.E.P.R. Discussion Papers.
  11. 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.
  12. Robin L. Lumsdaine & Eswar Prasad, 1999. "Identifying the Common Component in International Economic Fluctuations; A New Approach," IMF Working Papers 99/154, International Monetary Fund.
  13. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
  14. Harding, Don & Pagan, Adrian, 2001. "Extracting, Using and Analysing Cyclical Information," MPRA Paper 15, University Library of Munich, Germany.
  15. 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.
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