Understanding the evolution of world business cycles

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

Research output: Contribution to journalArticlepeer-review

171 Scopus citations

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 2008

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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