International confidence spillovers and business cycles in small open economies

Michal Brzoza-Brzezina and Jacek Kotłowski

No 2020-049, KAE Working Papers from Warsaw School of Economics, Collegium of Economic Analysis

Abstract: The economic literature has for a long time been looking for explanations of a very strong international correlation of business cycles. This paper shows empirically that common fluctuations can to some degree be the effect of confidence shocks beeing transmitted internationally. We focus on a large (euro area) and a small, nearby economy (Poland). Our results show that euro area confidence fluctuations account for approximately 40-70% of business cycle fluctuations both in the euro area and in Poland. More importantly, their transmission happens not only via traditional channels (e.g. by confidence affecting euro area GDP and then Polish GDP via trade), but to a large extent occurs directly (e.g. by news spreading via media).

Keywords: International spillovers; animal spirits; sentiments; business cycle (search for similar items in EconPapers)
JEL-codes: C32 E32 F44 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2020-05
New Economics Papers: this item is included in nep-eec, nep-mac, nep-opm and nep-tra
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Citations: View citations in EconPapers (2)

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http://hdl.handle.net/20.500.12182/1138 (application/pdf)

Related works:
Journal Article: International confidence spillovers and business cycles in small open economies (2021)
Working Paper: International confidence spillovers and business cycles in small open economies (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:sgh:kaewps:2020049

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