How Does Globalization Affect the Synchronization of Business Cycles?

Ayhan Kose, Eswar Prasad and Marco Terrones

No 2003/027, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the impact of rising trade and financial integration on international business cycle comovement among a large group of industrial and developing countries. The results provide at best limited support for the conventional wisdom that globalization has increased the degree of synchronization of business cycles. The evidence that trade and financial integration enhance global spillovers of macroeconomic fluctuations is stronger for industrial countries. One striking result is that, on average, cross-country consumption correlations have not increased in the 1990s, precisely when financial integration would have been expected to result in better risk-sharing opportunities, especially for developing countries.

Keywords: WP; output; GDP; consumption correlation; Macroeconomic fluctuations; trade and financial integration; output and consumption comovement; trade openness; terms of trade volatility; consumption fluctuation; business cycle correlation; trade linkage; world output; consumption risk; consumption growth; Business cycles; Consumption; Financial integration; Capital flows; Global (search for similar items in EconPapers)
Pages: 14
Date: 2003-03-04
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Citations: View citations in EconPapers (310)

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Journal Article: How Does Globalization Affect the Synchronization of Business Cycles? (2003)
Working Paper: How Does Globalization Affect the Synchronization of Business Cycles? (2003)
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