How Does Globalization Affect the Synchronization of Business Cycles?

Ayhan Kose, Eswar Prasad and Marco Terrones

No 702, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 mostly limited to 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: international transmission of shocks; trade and financial integration; macroeconomic fluctuations; cross-country comovement of output and consumption (search for similar items in EconPapers)
JEL-codes: E32 F41 F42 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2003-01
New Economics Papers: this item is included in nep-afr, nep-dge, nep-pke and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (327)

Published - published in: American Economic Review, 2003, 93 (2), 57-62

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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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