Working Paper: CEPR ID: DP4534
Authors: Fabio Canova; Matteo Ciccarelli; Eva Ortega
Abstract: This Paper examines the properties of G-7 cycles using a multicountry Bayesian panel VAR model with time variations, unit specific dynamics and cross country interdependences. We demonstrate the presence of a significant world cycle and show that country specific indicators play a much smaller role. We detect differences across business cycle phases but, apart from an increase in synchronicity in the late 1990s, find little evidence of major structural changes. We also find no evidence of the existence of a euro area specific cycle or of its emergence in the 1990s.
Keywords: Bayesian methods; Business cycle; G7 indicators; Panel data
JEL Codes: C11; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| World business cycle (F44) | Fluctuations in sales, industrial production, output, and employment across the G7 countries (E32) |
| World indicator (C43) | Persistent portions of G7 fluctuations (E39) |
| Country-specific indicators (O57) | Tracking cyclical movements (E32) |
| Economic contractions (E32) | Greater synchronization of fluctuations (E32) |
| No structural breaks in country indicators during the 1990s (O57) | National cycles are not disappearing (E32) |
| Euro area cycles (E32) | Movements in the world indicator (F29) |
| Movements in the world indicator (F29) | Commonalities in G7 fluctuations over time (F44) |