Globalization, the Business Cycle, and Macroeconomic Monitoring

By S. Boragan Aruoba, Marco Terrones, Ayhan Kose, Francis X. Diebold

February 1, 2011

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S. Boragan Aruoba, Marco Terrones, Ayhan Kose, and Francis X. Diebold Globalization, the Business Cycle, and Macroeconomic Monitoring, (USA: International Monetary Fund, 2011) accessed December 26, 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

We propose and implement a framework for characterizing and monitoring the global business cycle. Our framework utilizes high-frequency data, allows us to account for a potentially large amount of missing observations, and is designed to facilitate the updating of global activity estimates as data are released and revisions become available. We apply the framework to the G-7 countries and study various aspects of national and global business cycles, obtaining three main results. First, our measure of the global business cycle, the common G-7 real activity factor, explains a significant amount of cross-country variation and tracks the major global cyclical events of the past forty years. Second, the common G-7 factor and the idiosyncratic country factors play different roles at different times in shaping national economic activity. Finally, the degree of G-7 business cycle synchronization among country factors has changed over time.

Subject: Business cycles, Cyclical indicators, Disposable income, Economic growth, Employment, Industrial production, Labor, National accounts, Production

Keywords: Activity indicator, Business cycle synchronization, Business cycles, CEPR business cycle Dating Committee, Contraction, Country factor, Cyclical indicators, Dating committee, Disposable income, Dynamic factor model, Employment, Expansion, Factor loading, Global, Industrial production, Nowcasting, Real-time analysis, Recession, Turning Point, WP

Publication Details

Pages:

52
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/025
Stock No:

WPIEA2011025
ISBN:

9781455216727
ISSN:

1018-5941

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