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The Global Financial Crisis; An Anatomy of Global Growth

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  • Troy D Matheson

Abstract

The global financial crisis was a stark reminder of the importance of cross-country linkages in the global economy. We document growth synchronization across a diverse group of 185 countries covering 7 regions, and pay particular attention to the period around the global financial crisis. A dynamic factor model is used to decompose each country’s growth into contributions from global, regional, and idiosyncratic shocks. We find a high degree of global synchronization over 1990 to 2011, particularly across advanced economies. Examining the period around the global financial crisis, we find global shocks had large and widespread effects on growth, with more diversity in growth experiences in the early part of the recovery. In a recursive experiment, we find rising global growth synchronization just prior to the crisis, largely resulting from a shift in the importance of global shocks between countries. In contrast, the crisis period caused a much more widespread increase in growth synchronization, and was followed by a similarly pervasive decrease in synchronization in the early recovery.

Suggested Citation

  • Troy D Matheson, 2013. "The Global Financial Crisis; An Anatomy of Global Growth," IMF Working Papers 13/76, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:13/76
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    1. Roberto S. Mariano & Yasutomo Murasawa, 2003. "A new coincident index of business cycles based on monthly and quarterly series," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(4), pages 427-443.
    2. M. Ayhan Kose & Christopher Otrok & Eswar Prasad, 2012. "Global Business Cycles: Convergence Or Decoupling?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 511-538, May.
    3. Doz, Catherine & Giannone, Domenico & Reichlin, Lucrezia, 2011. "A two-step estimator for large approximate dynamic factor models based on Kalman filtering," Journal of Econometrics, Elsevier, vol. 164(1), pages 188-205, September.
    4. Ayhan Kose, M. & Otrok, Christopher & Whiteman, Charles H., 2008. "Understanding the evolution of world business cycles," Journal of International Economics, Elsevier, vol. 75(1), pages 110-130, May.
    5. Marta Bańbura & Michele Modugno, 2014. "Maximum Likelihood Estimation Of Factor Models On Datasets With Arbitrary Pattern Of Missing Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 29(1), pages 133-160, January.
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    1. repec:gam:jijfss:v:6:y:2018:i:2:p:50-:d:145475 is not listed on IDEAS

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