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Understanding the Evolution of World Business Cycles

Author/Editor: Kose, M. Ayhan | Otrok, Christopher | Whiteman, Charles H.
Authorized for Distribution: November 1, 2005
Electronic Access: Free Full Text (PDF file size is 307KB)
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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 studies the changes in world business cycles during 1960-2003. We employ a Bayesian dynamic latent factor model to estimate common and country-specific components in the main macroeconomic aggregates of the Group of Seven (G-7) countries. We then quantify the relative importance of these components in explaining comovement in each observable aggregate over three distinct time periods: the Bretton Woods (BW) period (1960-72), the period of common shocks (1972-86), and the globalization period (1986-2003). The results indicate that the common (G-7) factor explains a larger fraction of output, consumption, and investment volatility in the globalization period than in the BW period. These findings suggest that the degree of comovement of business cycles in major macroeconomic aggregates across the G-7 countries has increased during the globalization period.
 
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Series: Working Paper No. 05/211
Subject(s): Business cycles | Globalization | Group of Seven | Economic models
Author's keyword(s): International business cycles | globalization | transmission of macroeconomic fluctuations
 
English  
    Published:   November 1, 2005        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2005211   Pages:   36
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
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