How Does Globalization Affect the Synchronization of Business Cycles?
March 4, 2003
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Summary
This paper examines the impact of rising trade and financial integration on international business cycle comovement among a large group of industrial and developing countries. The results provide at best limited support for the conventional wisdom that globalization has increased the degree of synchronization of business cycles. The evidence that trade and financial integration enhance global spillovers of macroeconomic fluctuations is stronger for industrial countries. One striking result is that, on average, cross-country consumption correlations have not increased in the 1990s, precisely when financial integration would have been expected to result in better risk-sharing opportunities, especially for developing countries.
Subject: Balance of payments, Business cycles, Capital flows, Consumption, Economic growth, Financial integration, Financial markets, Globalization, National accounts
Keywords: business cycle correlation, Business cycles, Capital flows, Consumption, consumption correlation, consumption fluctuation, consumption growth, consumption risk, Financial integration, GDP, Global, Macroeconomic fluctuations, output, output and consumption comovement, terms of trade volatility, trade and financial integration, trade linkage, trade openness, world output, WP
Pages:
14
Volume:
2003
DOI:
Issue:
027
Series:
Working Paper No. 2003/027
Stock No:
WPIEA0272003
ISBN:
9781451844542
ISSN:
1018-5941
