Understanding the evolution of world business cycles

M. Ayhan Kose, Christopher Otrok, Charles H. Whiteman

Research output: Contribution to journalArticle

161 Citations (Scopus)

Abstract

This paper studies the changes in world business cycles during the period 1960-2003. We employ a Bayesian dynamic latent factor model to estimate common and country-specific components in the main macroeconomic aggregates (output, consumption, and investment) of the G-7 countries. We then quantify the relative importance of the common and country components in explaining comovement in each observable aggregate over three distinct time periods: the Bretton Woods (BW) period (1960:1-1972:2), the period of common shocks (1972:3-1986:2), and the globalization period (1986:3-2003:4). The results indicate that the common (G-7) factor explains, on average, a larger fraction of output, consumption and investment volatility in the globalization period than it does in the BW period.

Original languageEnglish (US)
Pages (from-to)110-130
Number of pages21
JournalJournal of International Economics
Volume75
Issue number1
DOIs
StatePublished - May 1 2008

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Bretton Woods
Globalization
Business cycles
Comovement
Common shocks
Latent factor models
Aggregate output
G-7 countries
Relative importance
Factors
Macroeconomics

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

Ayhan Kose, M. ; Otrok, Christopher ; Whiteman, Charles H. / Understanding the evolution of world business cycles. In: Journal of International Economics. 2008 ; Vol. 75, No. 1. pp. 110-130.
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Understanding the evolution of world business cycles. / Ayhan Kose, M.; Otrok, Christopher; Whiteman, Charles H.

In: Journal of International Economics, Vol. 75, No. 1, 01.05.2008, p. 110-130.

Research output: Contribution to journalArticle

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