Globalization, the Business Cycle, and Macroeconomic Monitoring

S. Boragan Aruoba, Marco Terrones, Ayhan Kose and Francis Diebold

No 2011/025, IMF Working Papers from International Monetary Fund

Abstract: We propose and implement a framework for characterizing and monitoring the global business cycle. Our framework utilizes high-frequency data, allows us to account for a potentially large amount of missing observations, and is designed to facilitate the updating of global activity estimates as data are released and revisions become available. We apply the framework to the G-7 countries and study various aspects of national and global business cycles, obtaining three main results. First, our measure of the global business cycle, the common G-7 real activity factor, explains a significant amount of cross-country variation and tracks the major global cyclical events of the past forty years. Second, the common G-7 factor and the idiosyncratic country factors play different roles at different times in shaping national economic activity. Finally, the degree of G-7 business cycle synchronization among country factors has changed over time.

Keywords: WP; country factor; Expansion; Contraction; Recession; Turning Point; Dynamic factor model; Nowcasting; Real-time analysis; business cycle synchronization; CEPR business cycle Dating Committee; factor loading; dating committee; activity indicator; Business cycles; Industrial production; Cyclical indicators; Employment; Disposable income; Global (search for similar items in EconPapers)
Pages: 52
Date: 2011-02-01
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Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Globalization, the Business Cycle, and Macroeconomic Monitoring (2011)
Chapter: Globalization, the Business Cycle, and Macroeconomic Monitoring (2010)
Working Paper: Globalization, the Business Cycle, and Macroeconomic Monitoring (2010)
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