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Business Cycle Spillovers

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  • Kamil Yilmaz

    (Koc University, Istanbul Turkey)

Abstract

We apply Diebold-Yilmaz spillover index methodology to monthly industrial production indices to study business cycle interdependence among G-6 countries. We show evidence that business cycle spillovers fluctuate substantially over time, increasing especially after the 1973-75 and 1981-82 recessions as well as during the expansion after the 2001 U.S. recession. Our most important result, however, is related to the current state of the world economy: In a matter of four months since September 2008, the business cycle spillover index recorded the sharpest increase ever and reached a record level as of December 2008, an unambiguous indicator that the global economy has already been in recession. Focusing on the direction of spillovers, we show that the recessionary shocks are originating mostly from the United States and spreading to other G-6 countries.

Suggested Citation

  • Kamil Yilmaz, 2009. "Business Cycle Spillovers," 2009 Meeting Papers 1079, Society for Economic Dynamics.
  • Handle: RePEc:red:sed009:1079
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    File URL: https://economicdynamics.org/meetpapers/2009/paper_1079.pdf
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    References listed on IDEAS

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    1. Brian M. Doyle & Jon Faust, 2005. "Breaks in the Variability and Comovement of G-7 Economic Growth," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 721-740, November.
    2. Stijn Claessens & M. Ayhan Kose & Marco E. Terrones, 2009. "What happens during recessions, crunches and busts?," Economic Policy, CEPR;CES;MSH, vol. 24, pages 653-700, October.
    3. James H. Stock & Mark W. Watson, 2005. "Understanding Changes In International Business Cycle Dynamics," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 968-1006, September.
    4. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
    5. Parkinson, Michael, 1980. "The Extreme Value Method for Estimating the Variance of the Rate of Return," The Journal of Business, University of Chicago Press, vol. 53(1), pages 61-65, January.
    6. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
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