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Disaggregating the international business cycle

  • Gilhooly, Robert

    ()

    (Monetary Policy Committee Unit, Bank of England)

  • Weale, Martin

    ()

    (Monetary Policy Committee Unit, Bank of England)

  • Wieladek, Tomasz

    ()

    (Monetary Policy Committee Unit, Bank of England)

This paper investigates the international business cycle with new sector level data on hours and output for Canada, Germany, France, Italy, the United Kingdom and the United States from 1992 Q1 to 2011 Q3. We estimate a Bayesian dynamic common factor model on this disaggregate data to decompose the quarterly growth rates of output, hours worked and labour productivity into contributions from global, country, sector and idiosyncratic factors. During the ‘Great Recession’ our results suggest that the global factor became the most important determinant of output, hours and labour productivity growth. Before the ‘Great Recession’, on the other hand, the global factor was not very important; country and idiosyncratic factors were the dominant influences on output, hours and productivity; sector factors never matter very much.

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Paper provided by Monetary Policy Committee Unit, Bank of England in its series Discussion Papers with number 37.

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Length: 40 pages
Date of creation: 17 Aug 2012
Date of revision:
Handle: RePEc:mpc:wpaper:0037
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  1. M. Ayhan Kose & Christopher Otrok & Eswar S. Prasad, 2008. "Global Business Cycles: Convergence or Decoupling?," NBER Working Papers 14292, National Bureau of Economic Research, Inc.
  2. Vincenzo Quadrini & Fabrizio Perri, 2011. "International Recessions," 2011 Meeting Papers 123, Society for Economic Dynamics.
  3. Christopher Otrok & Ayhan Kose & Mario J. Crucini, 2009. "What are the driving forces of international business cycles," 2009 Meeting Papers 820, Society for Economic Dynamics.
  4. Gregory, Allan W & Head, Allen C & Raynauld, Jacques, 1997. "Measuring World Business Cycles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 677-701, August.
  5. James H. Stock & Mark W. Watson, 2012. "Disentangling the Channels of the 2007-2009 Recession," NBER Working Papers 18094, National Bureau of Economic Research, Inc.
  6. Norrbin, Stefan C. & Schlagenhauf, Don E., 1988. "An inquiry into the sources of macroeconomic fluctuations," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 43-70, July.
  7. M. Ayhan Kose & Christopher Otrok & Charles H. Whiteman, 2005. "Understanding the Evolution of World Business Cycles," IMF Working Papers 05/211, International Monetary Fund.
  8. Jacquier, Eric & Polson, Nicholas G. & Rossi, P.E.Peter E., 2004. "Bayesian analysis of stochastic volatility models with fat-tails and correlated errors," Journal of Econometrics, Elsevier, vol. 122(1), pages 185-212, September.
  9. Chiu Adrian & Wieladek Tomasz, 2013. "Is the “Great Recession” really so different from the past?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 48, October.
  10. Hughes, Abigail & Saleheen, Jumana, 2012. "UK labour productivity since the onset of the crisis — an international and historical perspective," Bank of England Quarterly Bulletin, Bank of England, vol. 52(2), pages 138-146.
  11. Ohanian, Lee E. & Raffo, Andrea, 2012. "Aggregate hours worked in OECD countries: New measurement and implications for business cycles," Journal of Monetary Economics, Elsevier, vol. 59(1), pages 40-56.
  12. Granger, C. W. J., 1980. "Long memory relationships and the aggregation of dynamic models," Journal of Econometrics, Elsevier, vol. 14(2), pages 227-238, October.
  13. Haroon Mumtaz & Paolo Surico, 2012. "Evolving International Inflation Dynamics: World And Country-Specific Factors," Journal of the European Economic Association, European Economic Association, vol. 10(4), pages 716-734, 08.
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