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Globalization, the Business Cycle, and Macroeconomic Monitoring

  • S. Boragan Aruoba
  • Francis X. Diebold
  • M. Ayhan Kose
  • Marco E. Terrones

We propose and implement a framework for characterizing and monitoring the global business cycle. Our framework utilizes high-frequency data, allows us to account for a potentially large amount of missing observations, and is designed to facilitate the updating of global activity estimates as data are released and revisions become available. We apply the framework to the G-7 countries and study various aspects of national and global business cycles, obtaining three main results. First, our measure of the global business cycle, the common G-7 real activity factor, explains a significant amount of cross-country variation and tracks the major global cyclical events of the past forty years. Second, the common G-7 factor and the idiosyncratic country factors play different roles at different times in shaping national economic activity. Finally, the degree of G-7 business cycle synchronization among country factors has changed over time.

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File URL: http://www.nber.org/papers/w16264.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16264.

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Date of creation: Aug 2010
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Publication status: published as S. Borağan Aruoba & Francis X. Diebold & M. Ayhan Kose & Marco E. Terrones, 2011. "Globalization, the Business Cycle, and Macroeconomic Monitoring," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 7(1), pages 245 - 286.
Handle: RePEc:nbr:nberwo:16264
Note: AP EFG IFM
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Sørensen, Bent E & Yosha, Oved, 1999. "Risk Sharing and Industrial Specialization: Regional and International Evidence," CEPR Discussion Papers 2295, C.E.P.R. Discussion Papers.
  2. Imbs, Jean, 2010. "The First Global Recession in Decades," CEPR Discussion Papers 7973, C.E.P.R. Discussion Papers.
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