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Has Globalization Really Increased Business Cycle Synchronization?

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  • Eric Monnet
  • Damien Puy

Abstract

This paper assesses the strength of business cycle synchronization between 1950 and 2014 in a sample of 21 countries using a new quarterly dataset based on IMF archival data. Contrary to the common wisdom, we find that the globalization period is not associated with more output synchronization at the global level. The world business cycle was as strong during Bretton Woods (1950-1971) than during the Globalization period (1984-2006). Although globalization did not affect the average level of co-movement, trade and financial integration strongly affect the way countries co-move with the rest of the world. We find that financial integration de-synchronizes national outputs from the world cycle, although the magnitude of this effect depends crucially on the type of shocks hitting the world economy. This de-synchronizing effect has offset the synchronizing impact of other forces, such as increased trade integration.

Suggested Citation

  • Eric Monnet & Damien Puy, 2016. "Has Globalization Really Increased Business Cycle Synchronization?," IMF Working Papers 16/54, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:16/54
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    References listed on IDEAS

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    Cited by:

    1. Cesa-Bianchi, Ambrogio, 2016. "Finance and synchronization," LSE Research Online Documents on Economics 86226, London School of Economics and Political Science, LSE Library.
    2. repec:lrk:eeaart:35_2_10 is not listed on IDEAS

    More about this item

    Keywords

    Globalization; Trade integration; Financial integration; International Business Cycles; Synchronization; business cycle; economies; Open Economy Macroeconomics; International Policy Coordination and Transmission; All Countries;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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