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If the Unites States sneezes, does the world need paracetamol?

Author

Listed:
  • M. J. Herrerias

    (Université de la Méditerranée Aix Marseille II, GREQAM)

  • Javier Ordoñez

    (Department of Economics, Universitat Jaume I, Castellón, Spain)

Abstract

There is an old saying that states that “If the United States sneezes, the rest of the world catches a cold”. Against this background, it is argued that some countries, especifically China, can “decouple” from the US economy and sustain strong growth in the face of a US slowdown. In this paper we analyze the extent to which the US economy affects international business fluctuations across countries. A multivariate nonlinear LSTAR model is estimated for the GDP cyclical component of China, France, Germany, the UK and the USA. This nonlinear framework allows the business cycles asymmetries to be captured properly in order to identify the synchronization behavior across countries. Our results suggest that there is a relevant influence from the US cycle, since it acts as a source of international business cycle synchronization. However, spillovers from US cycle fluctuations to China are rather modest.

Suggested Citation

  • M. J. Herrerias & Javier Ordoñez, 2011. "If the Unites States sneezes, does the world need paracetamol?," Working Papers 2011/03, Economics Department, Universitat Jaume I, Castellón (Spain).
    • Handle: RePEc:jau:wpaper:2011/03
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    References listed on IDEAS

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    More about this item

    Keywords

    Business Cycle; nonlinearities; synchronization; decoupling;
    All these keywords.

    JEL classification:

    • 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
    • F15 - International Economics - - Trade - - - Economic Integration

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