Multivariate Business Cycle Synchronization in Small Samples*

Bertrand Candelon, Jan Piplack and Stefan Straetmans

Oxford Bulletin of Economics and Statistics, 2009, vol. 71, issue 5, 715-737

Abstract: In this paper, we study the degree of business cycle synchronization by means of a small sample version of the Harding and Pagan's [Journal of Econometrics (2006) Vol. 132, pp. 59–79] Generalized Method of Moment test. We show that the asymptotic version of the test gets increasingly distorted in small samples when the number of countries grows large. However, a block bootstrapped version of the test can remedy the size distortion when the time series length divided by the number of countries T/n is sufficiently large. Applying the technique to a number of business cycle proxies of developed economies, we are unable to reject the null hypothesis of a non‐zero common multivariate synchronization index for certain economically meaningful subsets of these countries.

Date: 2009
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