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Regionalization vs. Globalization

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  • Mr. Ayhan Kose
  • Mr. Christopher Otrok
  • Mr. Hideaki Hirata

Abstract

Both global and regional economic linkages have strengthened substantially over the past quarter century. We employ a dynamic factor model to analyze the implications of these linkages for the evolution of global and regional business cycles. Our model allows us to assess the roles played by the global, regional, and country-specific factors in explaining business cycles in a large sample of countries and regions over the period 1960–2010. We find that, since the mid-1980s, the importance of regional factors has increased markedly in explaining business cycles especially in regions that experienced a sharp growth in intra-regional trade and financial flows. By contrast, the relative importance of the global factor has declined over the same period. In short, the recent era of globalization has witnessed the emergence of regional business cycles.

Suggested Citation

  • Mr. Ayhan Kose & Mr. Christopher Otrok & Mr. Hideaki Hirata, 2013. "Regionalization vs. Globalization," IMF Working Papers 2013/019, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2013/019
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    More about this item

    Keywords

    WP; regional factor; factor loading; global factor; variance share; Business cycles; Comovement; Synchronization; Trade linkages; Financial linkages; business cycle synchronization; world business cycle; business cycle comovement; business cycle correlation; Consumption; Factor models; Trade balance; Global; North America; Europe; Asia and Pacific; North Africa;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • 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

    Statistics

    Access and download statistics

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