Working Paper: CEPR ID: DP8728
Authors: Sumru G. Altug; Mustafa Emin; Bilin Neyapti
Abstract: This paper investigates the relationship between the main features of business cycles and the institutional and structural characteristics of countries of up to 62 industrial, emerging and formerly centrally planned economies from all continents. We derive the business cycle characteristics using the nonparametric Harding-Pagan approach. Our analysis reveals that institutional factors have significant associations with the duration and amplitude of business cycles. Examining the determinants of business cycle synchronization for the countries in our sample, we also demonstrate that the bilateral proximity of institutional and policy environments matters in addition to the gravity arguments, trade intensity and bilateral financial linkages used in earlier studies
Keywords: Business cycles; Institutions; Nonparametric analysis; Synchronization
JEL Codes: C32; E32; E37
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Governance quality (H11) | Business cycle duration (E32) |
| Governance quality (H11) | Business cycle amplitude (E32) |
| Inflation targeting regimes (E63) | Business cycle duration (E32) |
| Inflation targeting regimes (E63) | Business cycle amplitude (E32) |
| Openness to trade (F10) | Business cycle duration (E32) |
| Currency union membership (F36) | Business cycle characteristics (E32) |
| Central bank independence (E58) | Business cycle characteristics (E32) |