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Financial Openness and Business Cycle Volatility

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  • Pierdzioch, Christian
  • Döpke, Jörg
  • Buch, Claudia M.

Abstract

This paper discusses whether the integration of international financial markets affects business cycle fluctuations. In the framework of a new open economy macro-model, we show that the link between financial openness and business cycle volatility depends on the nature of the underlying shock. Empirical evidence supports this conclusion. Our results also show that the link between business cycle volatility and financial openness has not been stable over time.

Suggested Citation

  • Pierdzioch, Christian & Döpke, Jörg & Buch, Claudia M., 2002. "Financial Openness and Business Cycle Volatility," Kiel Working Papers 1121, Kiel Institute for the World Economy (IfW Kiel).
  • Handle: RePEc:zbw:ifwkwp:1121
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    More about this item

    Keywords

    Open Economy Macroeconomics; Monetary union; Business cycles; Financial markets;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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