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Measuring World Business Cycles


  • Allan Gregory

    (B.A. (Toronto), Ph.D. (Queen's))

  • Allen Head
  • Jacques Raynauld


Using Kalman filtering and dynamic factor analysis, we decompose fluctuations in real aggregate output, consumption, and investment for the G7 countries into factors that are (i) common across all countries and aggregates, (ii) common across aggregates within a country, and (iii) specific to each data series. In quarterly data for the period 1970-1993, fluctuations in all of the aggregates contain world and country-specific common components which are significant both statistically and economically. Over this period all seven countries experience business cycle episodes primarily attributable to the world cycle and other episodes driven primarily by the country-specific factor. The share of the variance of aggregate output accounted for by the world business cycle in our estimates ranges from 13% for the U.K. to 67% for France. Also, the world common component in growth rates is more strongly serially correlated than is output growth in any of the seven countries.

Suggested Citation

  • Allan Gregory & Allen Head & Jacques Raynauld, 1994. "Measuring World Business Cycles," Working Paper 902, Economics Department, Queen's University.
  • Handle: RePEc:qed:wpaper:902

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    scoring; Kalman filter;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles


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