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How Does Globalization Affect the Synchronization of Business Cycles?

Author/Editor: Kose, M. Ayhan | Prasad, Eswar | Terrones, Marco
Authorized for Distribution: January 1, 2003
Electronic Access: Free Full Text (PDF file size is 408KB)
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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: 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.
 
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Series: Working Paper No. 03/27
Subject(s): Globalization | Trade | Production | Business cycles
Author's keyword(s): Macroeconomic fluctuations | trade and financial integration | output and consumption comovement
 
English  
    Published:   January 1, 2003        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA0272003   Pages:   13
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
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