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Has globalization increased the synchronicity of international business cycles?

  • Berge, Travis

The past 30 years have been witness to an inexorable change in the degree to which economies are connected internationally. At the same time, the 2007-2008 recession was the first ‘global recession’ in decades. This article explores how international trade and cross-border holdings financial assets impact the synchronization of business cycles internationally. The paper begins by producing chronologies of business cycle turning points for a group of 32 major economies covering 40 years of history. With these chronologies in hand, we document the degree of bilateral business cycle synchronization, relating cross-country differences in synchronization to bilateral trade and financial linkages. The analysis confirms that countries with deep trade linkages tend to experience similar business cycle fluctuations. However, we find no such relationship for financial linkages.

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File URL: http://mpra.ub.uni-muenchen.de/42392/1/MPRA_paper_42392.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42392.

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Date of creation: 01 Oct 2012
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Handle: RePEc:pra:mprapa:42392
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  1. Don Harding & Adrian Pagan, 2000. "Disecting the Cycle: A Methodological Investigation," Econometric Society World Congress 2000 Contributed Papers 1164, Econometric Society.
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  9. Engel, Charles M & Rose, Andrew K, 2001. "Currency Unions and International Integration," CEPR Discussion Papers 2659, C.E.P.R. Discussion Papers.
  10. Imbs, Jean, 2006. "The real effects of financial integration," Journal of International Economics, Elsevier, vol. 68(2), pages 296-324, March.
  11. Enders, Zeno & Kollmann, Robert & Müller, Gernot, 2010. "Global Banking and International Business Cycles," CEPR Discussion Papers 7972, C.E.P.R. Discussion Papers.
  12. Troy Davig & Craig Hakkio, 2010. "What is the effect of financial stress on economic activity," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 35-62.
  13. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, 05.
  14. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
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