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International Comovements, Business Cycle and Inflation: a Historical Perspective

  • Haroon Mumtaz

    ()

    (Center for Central Banking Studies, Bank of England)

  • Saverio Simonelli

    ()

    (Università di Napoli Federico II, EUI and CSEF)

  • Paolo Surico

    ()

    (External MPC unit, Bank of England)

Using a dynamic factor model, we uncover four main empirical regularities on international comovements in a long-run panel of real and nominal variables. First, the contribution of world comovements to domestic output growth has decreased over the post-WWII period. The contribution of regional comovements, however, has increased significantly. Second, the share of inflation variation due to a global factor has become larger since 1985. Third, over most of the post-WWII period, international comovements within regions have accounted for the bulk of fluctuations in business cycle and inflation. Fourth, prices have become significantly less countercyclical during the post-1984 sample, with the largest contribution due to external developments.

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Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 233.

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Date of creation: 10 Jul 2009
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Publication status: Published in Review of Economic Dynamics , 2011, vol. 14(1), pp. 176-198
Handle: RePEc:sef:csefwp:233
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