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.degree of business cycle synchronization. For example, on ... How does increased specialization affect the degree of synchronization? The answer ... What about the impact of financial integration on the extent of business cycle comovement?
|Title||:||Globalization, the Business Cycle, and Macroeconomic Monitoring|
|Author||:||S. Boragan Aruoba, Mr. Marco Terrones, Mr. M. Ayhan Kose, Mr. Francis X. Diebold|
|Publisher||:||International Monetary Fund - 2011-02-01|