How Does Globalization Affect the Synchronization of Business Cycles?

By Ayhan Kose, Eswar S Prasad, Marco Terrones

March 4, 2003

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Ayhan Kose, Eswar S Prasad, and Marco Terrones. How Does Globalization Affect the Synchronization of Business Cycles?, (USA: International Monetary Fund, 2003) accessed December 21, 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 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.

Subject: Balance of payments, Business cycles, Capital flows, Consumption, Economic growth, Financial integration, Financial markets, Globalization, National accounts

Keywords: Business cycle correlation, Business cycles, Capital flows, Consumption, Consumption correlation, Consumption fluctuation, Consumption growth, Consumption risk, Financial integration, GDP, Global, Macroeconomic fluctuations, Output, Output and consumption comovement, Terms of trade volatility, Trade and financial integration, Trade linkage, Trade openness, World output, WP

Publication Details

Pages:

14
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/027
Stock No:

WPIEA0272003
ISBN:

9781451844542
ISSN:

1018-5941

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