Working Paper: CEPR ID: DP2267
Authors: Jean Imbs
Abstract: This paper provides novel evidence on the determinants of the synchronization in business cycles. I find trade has surprisingly small quantitative effects. On the other hand, pairs of countries with higher aggregate income level experience significantly more synchronized business cycles, and this happens largely because they have similar sectoral production patterns. Geographic considerations do not matter systematically. The results hold for a large sample of countries with very different income levels, as well as within the OECD. They are robust to different filtering devices, across yearly and quarterly frequency and for a variety of data sources. These findings are interpreted in a model where international income disparities correspond to differences in production patterns, and thus to different degrees of exposure to common sectoral stochastic developments.
Keywords: international business cycles; trade; sectoral shocks
JEL Codes: E32; F12; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher aggregate income levels (E25) | More synchronized business cycles (F44) |
| Higher aggregate income levels (E25) | Similar sectoral production patterns (L52) |
| Similar sectoral production patterns (L52) | More synchronized business cycles (F44) |
| Trade (F19) | More synchronized business cycles (F44) |
| Geographic proximity (R12) | More synchronized business cycles (F44) |