Co-Fluctuations

Jean Imbs

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: This paper studies the determinants of the international synchronization of business cycles. Surprisingly, countries that trade more do not appear to have more synchronized cycles once other factors are accounted for. On the other hand, the extent of co-fluctuations increases quite robustly with the income level, so that two rich countries are unconditionally more synchronized. We develop a model where this happens because the world moves from an unstable steady state with full international specialization to a stable symmetric one. Similar countries produce similar goods and as a result experience sectoral shocks that are of equal importance. By contrast, different income levels reflect differences in production patterns, where the North produces manufactures and the South agricultural goods. Since there is no particular reason why stochastic developments in those two sectors should be correlated with one another, we should expect less cyclical comovement between a rich and a poor country. Finally, the model is consistent with the tendency for trade amongst developed countries to be mostly intra-industry.

Keywords: international business cycles; synchronization; sectoral shocks (search for similar items in EconPapers)
JEL-codes: E32 F15 F30 F41 (search for similar items in EconPapers)
Pages: 31 pages
Date: 1998-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Related works:
Working Paper: Co-Fluctuations (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:lau:crdeep:9819

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