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What Are the Driving Forces of International Business Cycles?

  • Mario J. Crucini

    ()

    (Department of Economics, Keynes College, University of Kent)

  • M. Ayhan Kose

    ()

    (Financial Studies Division, Research Department, International Monetary Fund)

  • Christopher Otrok

    ()

    (Department of Economics, University of Virginia)

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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File URL: http://www.accessecon.com/pubs/VUECON/vu08-w15.pdf
File Function: First version, 2008
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Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0815.

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Date of creation: Sep 2008
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Handle: RePEc:van:wpaper:0815
Contact details of provider: Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

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  16. Otrok, C. & Whiteman, C.H., 1996. "Bayesian Leading Indicators: Measuring and Predicting Economic Conditions in Iowa," Working Papers 96-14, University of Iowa, Department of Economics.
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