Regionalization vs. Globalization

Author/Editor: Hideaki Hirata ; M. Ayhan Kose ; Christopher Otrok
Publication Date: January 22, 2013
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: Abstract: Both global and regional economic linkages have strengthened substantially over the past quarter century. We employ a dynamic factor model to analyze the implications of these linkages for the evolution of global and regional business cycles. Our model allows us to assess the roles played by the global, regional, and country-specific factors in explaining business cycles in a large sample of countries and regions over the period 1960–2010. We find that, since the mid-1980s, the importance of regional factors has increased markedly in explaining business cycles especially in regions that experienced a sharp growth in intra-regional trade and financial flows. By contrast, the relative importance of the global factor has declined over the same period. In short, the recent era of globalization has witnessed the emergence of regional business cycles.
Series: Working Paper No. 13/19
Subject(s): Globalization | Bilateral trade | Business cycles | Cross country analysis | Time series | Economic models

Publication Date: January 22, 2013
ISBN/ISSN: 9781557753281/1018-5941 Format: Paper
Stock No: WPIEA2013019 Pages: 65
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