Business Cycle Synchronisation Disentangling Trade And Financial Linkages
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How Does Globalization Affect the Synchronization of Business Cycles?
Author | : M. Ayhan Kose |
Publisher | : International Monetary Fund |
Total Pages | : 20 |
Release | : 2003-03-04 |
Genre | : Business & Economics |
ISBN | : |
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.
How Much Do Trade and Financial Linkages Matter for Business Cycle Synchronization in a Small Economy?
Author | : Alicia García-Herrero |
Publisher | : |
Total Pages | : 37 |
Release | : 2018 |
Genre | : |
ISBN | : |
We analyze empirically whether trade and financial linkages between two countries increase the synchronization of their business cycles directly or indirectly. In a system of equations, we use a newly processed database on the bilateral linkages of a small open economy, namely Spain. We prefer this to the generally used US data, to avoid other channels of influence of such a large economy affecting the results. We find that both trade or financial linkages only foster synchronization of business cycles indirectly, by increasing the similarity of economic structure between countries, which itself induces more similar output movements. This result suggests that sectoral shocks, rather than intra-industry shocks, have prevailed in the last 15 years. The net effects of both trade and financial linkages on business cycle synchronization are statistically significant, but very small in economic terms. Common macroeconomic policies, instead, are much more important determinants of output co-movements.
Has Globalization Really Increased Business Cycle Synchronization?
Author | : Eric Monnet |
Publisher | : International Monetary Fund |
Total Pages | : 55 |
Release | : 2016-03-08 |
Genre | : Business & Economics |
ISBN | : 1513564897 |
This paper assesses the strength of business cycle synchronization between 1950 and 2014 in a sample of 21 countries using a new quarterly dataset based on IMF archival data. Contrary to the common wisdom, we find that the globalization period is not associated with more output synchronization at the global level. The world business cycle was as strong during Bretton Woods (1950-1971) than during the Globalization period (1984-2006). Although globalization did not affect the average level of co-movement, trade and financial integration strongly affect the way countries co-move with the rest of the world. We find that financial integration de-synchronizes national outputs from the world cycle, although the magnitude of this effect depends crucially on the type of shocks hitting the world economy. This de-synchronizing effect has offset the synchronizing impact of other forces, such as increased trade integration.
How Does Globalization Affect the Synchronization of Business Cycles?
Author | : M. Ayhan Kose |
Publisher | : |
Total Pages | : 14 |
Release | : 2006 |
Genre | : |
ISBN | : |
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.
Trade Integration and Business Cycle Synchronization
Author | : Mr.Romain A Duval |
Publisher | : International Monetary Fund |
Total Pages | : 46 |
Release | : 2014-04-03 |
Genre | : Business & Economics |
ISBN | : 1475523599 |
This paper reexamines the relationship between trade integration and business cycle synchronization (BCS) using new value-added trade data for 63 advanced and emerging economies during 1995–2012. In a panel framework, we identify a strong positive impact of trade intensity on BCS—conditional on various controls, global common shocks and country-pair heterogeneity—that is absent when gross trade data are used. That effect is bigger in crisis times, pointing to trade as an important crisis propagation mechanism. Bilateral intra-industry trade and trade specialization correlation also appear to increase co-movement, indicating that not only the intensity but also the type of trade matters. Finally, we show that dependence on Chinese final demand in value-added terms amplifies the international spillovers and synchronizing impact of growth shocks in China.
Hysteresis and Business Cycles
Author | : Ms.Valerie Cerra |
Publisher | : International Monetary Fund |
Total Pages | : 50 |
Release | : 2020-05-29 |
Genre | : Business & Economics |
ISBN | : 1513536990 |
Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.
Catching the Flu from the United States
Author | : Filippo di Mauro |
Publisher | : Springer |
Total Pages | : 236 |
Release | : 2010-07-14 |
Genre | : Business & Economics |
ISBN | : 0230282075 |
Looking at historical cross-country interactions, this book examines the role of the US in the world economy. Illustrating that US shocks tend to have a global nature and that Monetary Union only partially shelters the Euro area from its external environment, the US should fully assume its responsibility, minimizing shock transmission.
Poland and the Eurozone
Author | : J. Hölscher |
Publisher | : Springer |
Total Pages | : 409 |
Release | : 2014-10-21 |
Genre | : Business & Economics |
ISBN | : 1137426411 |
Poland is one of Europe's economic out-performers. The country's history and geography encourage it to be in favour of deeper European integration. This book aims to contribute to discussions on the future shape of EMU and the next steps ahead.