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What are the driving forces of international business cycles

  • Christopher Otrok

    (University of Virginia)

  • Ayhan Kose

    (IMF)

  • Mario J. Crucini

    (Vanderbilt University and NBER)

We examine the driving forces of G-7 business cycles. We decompose national business cycles into common and nation-specific components using a dynamic factor model. We also do this for driving variables found in business cycle models: productivity; measures of fiscal and monetary policy; the terms of trade and oil prices. We find a large common factor in oil prices, productivity, and the terms of trade. Productivity is the main driving force, with other drivers isolated to particular nations or sub-periods. Along these lines, we document shifts in the correlation of the G-7 component of each driver with the overall G-7 cycle.

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Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 820.

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Date of creation: 2009
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Handle: RePEc:red:sed009:820
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Web page: http://www.EconomicDynamics.org/society.htm
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