Spillover effects in international business cycles

Maximo Camacho, Matías Pacce and Gabriel Pérez-Quirós
Additional contact information
Gabriel Pérez-Quirós: European Central Bank and CEPR
Authors registered in the RePEc Author Service: Gabriel Perez Quiros

No 2034, Working Papers from Banco de España

Abstract: To analyze the international transmission of business cycle fluctuations, we propose a new multilevel dynamic factor model with a block structure that (i) does not restrict the factors to being orthogonal and (ii) mixes data sampled at quarterly and monthly frequencies. By means of Monte Carlo simulations, we show the high performance of the model in computing inferences of the unobserved factors, accounting for the spillover effects, and estimating the model’s parameters. We apply our proposal to data from the G7 economies by analyzing the responses of national factors to shocks in foreign factors and by quantifying the changes in national GDP expectations in response to unexpected positive changes in foreign GDPs. Although the share of the world factor as a source of the international transmission of fluctuations is still signicant, this is partially absorbed by the spillover transmissions. In addition, we document a pro-cyclical channel of international transmission of output growth expectations, with the US and UK being the countries that generate the greatest spillovers and Germany and Japan being the countries that generate the smallest spillovers. Therefore, policymakers should closely monitor the evolution of foreign business cycle expectations.

Keywords: international business cycles; mixed frequency data; bayesian estimation; spillover effects (search for similar items in EconPapers)
JEL-codes: C22 E32 F41 F42 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2020-11
New Economics Papers: this item is included in nep-cmp and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 20/Files/dt2034e.pdf First version, November 2020 (application/pdf)

Related works:
Working Paper: Spillover Effects in International Business Cycles (2021)
Working Paper: Spillover effects in international business cycles (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2034

Access Statistics for this paper

More papers in Working Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España ().