Understanding the Evolution of World Business Cycles

By Ayhan Kose, Christopher Otrok, Charles H. Whiteman

November 1, 2005

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Ayhan Kose, Christopher Otrok, and Charles H. Whiteman Understanding the Evolution of World Business Cycles, (USA: International Monetary Fund, 2005) accessed November 23, 2024

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.

Subject: Business cycles, Consumption, Econometric analysis, Economic growth, Factor models, Globalization, National accounts, Vector autoregression

Keywords: Business cycles, Consumption, Country factor, Economic activity, Factor granger, Factor loading, Factor models, First period, Global, Globalization, Globalization period, International business cycles, Monetary policy, Transmission of macroeconomic fluctuations, Vector autoregression, World factor, WP

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/211
Stock No:

WPIEA2005211
ISBN:

9781451862300
ISSN:

1018-5941

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