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Business Cycle Spillovers

  • Kamil Yilmaz

    (Koc University, Istanbul Turkey)

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.

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File URL: https://economicdynamics.org/meetpapers/2009/paper_1079.pdf
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Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 1079.

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Date of creation: 2009
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Handle: RePEc:red:sed009:1079
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. 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, 09.
  2. 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.
  3. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
  4. Brian M. Doyle & Jon Faust, 2003. "Breaks in the variability and co-movement of G-7 economic growth," International Finance Discussion Papers 786, Board of Governors of the Federal Reserve System (U.S.).
  5. 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.
  6. 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.
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