IDEAS home Printed from
   My bibliography  Save this paper

The Dynamics of Permanent and Transitory Components in International Business Cycles


  • Shushanik Papanyan

    () (Department of Economics, University of Texaas at Arlington)


The paper investigates the dynamics of permanent and transitory components that are common across seven developed nations of the world. The common components are modeled to exhibit different behavior in the expansion and recession phases of international business cycles. I employ a multivariate unobserved components model with Markov regime switching to measure the common components of international time series. The model is estimated in its state-space representation by applying the Kalman filter and Kim’s (1994) approximate maximum likelihood algorithm. I find that, in contrast to individual country’s business cycles, the international business cycle does not exhibit classical contraction and expansion phases. The international permanent component has two phases: a high-growth phase and a low-growth phase, and there is no evidence of an international transitory component. I find that the switch from a high-growth regime to a low-growth regime occurs in the second quarter of 1973. There are no further switches that occur from one regime to another. I also find that among the seven developed nations examined, Japan is the most sensitive and Germany is the least sensitive to international permanent shocks.

Suggested Citation

  • Shushanik Papanyan, 2005. "The Dynamics of Permanent and Transitory Components in International Business Cycles," Working Papers 0504, University of Texas at Arlington, Department of Economics.
  • Handle: RePEc:txa:wpaper:0504

    Download full text from publisher

    File URL:
    File Function: First version, 2004
    Download Restriction: no

    More about this item


    international business cycle; nonlinear; Markov switching; unobserved components; G7;

    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
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:txa:wpaper:0504. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shushanik Papanyan). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.