Financial Globalization and Real Regionalization

Jonathan Heathcote

Working Papers from Georgetown University, Department of Economics

Abstract: Over the period 1972-1986, the U.S. business cycle was strongly correlated with the business cycle in the rest of the industrialized world. Over the period 1986-2000, international co-movement was much weaker (real regionalization). At the same time, U.S. international asset trade has increased significantly (financial globalization). We first document these phenomena in detail and then argue that they are related. In particular, we present a model in which financial globalization occurs endogenously in response to less correlated real shocks. Financial globalization, by enhancing cross-border capital flows, further reduces the international correlations in GDP and factor supplies. We find that both less correlated shocks and the endogenous change in international financial markets are needed to quantitatively account for the observed changes in the international business cycle.

Keywords: International business cycles; International diversification; Financial integration; Comovement (search for similar items in EconPapers)
JEL-codes: F36 F41 (search for similar items in EconPapers)
Date: 2003-09-03
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www8.georgetown.edu/departments/economics/pdf/320.pdf Full text (application/pdf)
None

Related works:
Journal Article: Financial globalization and real regionalization (2004)
Working Paper: Financial Globalization and Real Regionalization (2002)
Working Paper: Financial Globalization and Real Regionalization (2002)
Working Paper: Financial Globalization and Real Regionalization (2001)
Working Paper: Financial Globalization and Real Regionalization (2001)
Working Paper: Financial Globalization and Real Regionalization (2001)
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:geo:guwopa:gueconwpa~03-03-20

Ordering information: This working paper can be ordered from
Roger Lagunoff Professor of Economics Georgetown University Department of Economics Washington, DC 20057-1036
http://econ.georgetown.edu/

Access Statistics for this paper

More papers in Working Papers from Georgetown University, Department of Economics Georgetown University Department of Economics Washington, DC 20057-1036.
Bibliographic data for series maintained by Marcia Suss ( this e-mail address is bad, please contact ).