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International Business Cycle Spillovers

  • Kamil Yilmaz

    ()

    (Koc University)

We apply Diebold-Yilmaz spillover index methodology to monthly industrial production indices to study business cycle interdependence among G-6 industrialized countries since 1958. The business cycle spillover index fluctuates substantially over time, increasing especially after the 1973-75, 1981-82 and 2001 U.S. recessions. The band within which the spillover index fluctuates has widened since the start of the globalization process in the early 1990s. Our most important result, however, concerns the current state of the world economy: In a matter of four months from September to December 2008, the business cycle spillover index recorded the sharpest increase ever, reaching a record level as of December 2008 (See http://data.economicresearchforum.org/erf/bcspill.aspx?lang=en for updates of the spillover plot). Focusing on directional spillover measures, we show that in the current episode the shocks are mostly originating from the United States and spreading to other industrialized countries. We also show that, throughout the period of analysis, the U.S. (1980s and 2000s) and Japan (1970s and 2000s) have been the major transmitters of shocks among the industrialized countries.

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File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_0903.pdf
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Paper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 0903.

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Length: 33 pages
Date of creation: Mar 2009
Date of revision: Nov 2009
Handle: RePEc:koc:wpaper:0903
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  1. Canova, Fabio & Ciccarelli, Matteo & Ortega, Eva, 2007. "Similarities and convergence in G-7 cycles," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 850-878, April.
  2. Marco Terrones & M. Ayhan Kose & Stijn Claessens, 2008. "What Happens During Recessions, Crunches, and Busts?," IMF Working Papers 08/274, International Monetary Fund.
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  7. Gruben, William C. & McLeod, Darryl, 1998. "Capital Flows, Savings, and Growth in the 1990s," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(3, Part 1), pages 287-301.
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  9. Taymaz, Erol & Yilmaz, Kamil, 2006. "Productivity and Trade Orientation: Turkish Manufacturing Industry Before and After the Customs Union," MPRA Paper 58843, University Library of Munich, Germany, revised 2007.
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  11. Michael ARTIS & Ana Beatriz C. GALVÃO & Massimiliano MARCELLINO, 2003. "The transmission mechanism in a changing world," Economics Working Papers ECO2003/18, European University Institute.
  12. Kamil Yılmaz & Şule Özler, 2007. "Productivity response to reduction in trade barriers: Evidence from Turkish manufacturing plants," Koç University-TUSIAD Economic Research Forum Working Papers 0704, Koc University-TUSIAD Economic Research Forum.
  13. James H. Stock & Mark W. Watson, 2005. "Understanding Changes In International Business Cycle Dynamics," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 968-1006, 09.
  14. Bernard M. Hoekman & Togan Sübidey, 2005. "Turkey : Economic Reform and Accession to the European Union," World Bank Publications, The World Bank, number 7494, September.
  15. Togan, Sübidey, 1997. "Opening up the Turkish Economy in the Context of the Customs Union with EU," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 12, pages 157-179.
  16. 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.
  17. Roberto A. De Santis, 2001. "The 1990 Trade Liberalisation Policy of Turkey: An Applied General Equilibrium Assessment," International Economic Journal, Taylor & Francis Journals, vol. 15(2), pages 115-132, June.
  18. Erol Taymaz & Kamil Yılmaz, 2008. "Integration with the Global Economy: The Case of Turkish Automobile and Consumer Electronics Industries," Koç University-TUSIAD Economic Research Forum Working Papers 0801, Koc University-TUSIAD Economic Research Forum.
  19. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
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