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What Are the Driving Forces of International Business Cycles?

  • Mario J. Crucini
  • M. Ayhan Kose
  • Christopher Otrok

We examine the driving forces of G-7 business cycles. We decompose national business cycles into common and nation-specific components using a dynamic factor model. We also do this for driving variables found in business cycle models: productivity; measures of fiscal and monetary policy; the terms of trade and oil prices. We find a large common factor in oil prices, productivity, and the terms of trade. Productivity is the main driving force, with other drivers isolated to particular nations or sub-periods. Along these lines, we document shifts in the correlation of the G-7 component of each driver with the overall G-7 cycle.

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File URL: http://www.nber.org/papers/w14380.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14380.

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Date of creation: Oct 2008
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Publication status: published as Mario Crucini & Ayhan Kose & Christopher Otrok. "What are the driving forces of international business cycles?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics. Volume 14, Issue 1. (January 2011)
Handle: RePEc:nbr:nberwo:14380
Note: IFM
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