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Understanding the Evolution of World Business Cycles
Author:
Mr. Ayhan Kose
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Mr. Christopher Otrok
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Charles H. Whiteman null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2005: Issue 211
Language:
English
Publication Date:
01 Nov 2005
DOI:
https://doi.org/10.5089/9781451862300.001
ISBN:
9781451862300
ISSN:
1018-5941
Pages:
36
Keywords:
WP; first period; country factor; economic activity; monetary policy; International business cycles; globalization; transmission of macroeconomic fluctuations; factor granger; globalization period; factor loading; world factor; Business cycles; Consumption; Factor models; Vector autoregression; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund