International business cycles under fixed and flexible exchange rate regimes
Michael Kouparitsas ()
No WP-03-28, Working Paper Series from Federal Reserve Bank of Chicago
This paper studies the changing characteristics of post-war international comovement under fixed and flexible exchange regimes. I find that business cycle comovement among all the G7 economies was highest in the universally flexible exchange rate era following the collapse of Bretton Woods (BW) and before the Basle-Nyborg agreement tightened the bands governing the European Exchange Rate Mechanism (ERM). With the exception of a few examples (Canada/US and Germany/France) G7 business cycles were far less synchronized in the universally fixed exchange rate BW era. More recently the ERM period in which continental Europe maintained fixed exchange rates, is characterized by a high degree of comovement among continental Europe and the English-speaking G7 countries, with little synchronization across these groups. I find that these changing patterns of comovement were driven by changes in the propagation of shocks rather changes in the relative volatility of shocks themselves across these time periods.
Keywords: Business cycles; Foreign exchange rates (search for similar items in EconPapers)
Date: 2003, Revised 2003
New Economics Papers: this item is included in nep-ifn and nep-mac
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