Has Globalization Really Increased Business Cycle Synchronization?

March 8, 2016

Preview Citation

Format: Chicago

Eric Monnet, and Damien Puy. Has Globalization Really Increased Business Cycle Synchronization?, (USA: International Monetary Fund, 2016) accessed December 3, 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 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.

Subject: Business cycles, Economic growth, Economic integration, Exchange rate arrangements, Financial integration, Financial markets, Foreign exchange, Globalization, Trade integration

Keywords: Bretton Woods period, Business cycle synchronization, Business cycles, Exchange rate arrangements, Financial integration, Global, Globalization, Globalization period, International Business Cycles, Movement pattern, Post-war period, Synchronization, Trade integration, World business cycle, WP

Publication Details

Pages:

55
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/054
Stock No:

WPIEA2016054
ISBN:

9781513564890
ISSN:

1018-5941

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