Understanding the Evolution of World Business Cycles

By Ayhan Kose, Christopher Otrok, Charles H. Whiteman. Social Science Research Network, 2005

516 citations recorded by the source corpus.

This paper studies the changes in world business cycles during 1960-2003. We employ a Bayesian dynamic latent factor model to estimate common and country-specific components in the main macroeconomic aggregates of the Group of Seven (G-7) countries. We then quantify the relative importance of these components in explaining comovement in each observable aggregate over three distinct time periods: the Bretton Woods (BW) period (1960-72), the period of common shocks (1972-86), and the globalization period (1986-2003). The results indicate that the common (G-7) factor explains a larger fraction of output, consumption, and investment volatility in the globalization period than in the BW period. These findings suggest that the degree of comovement of business cycles in major macroeconomic aggregates across the G-7 countries has increased during the globalization period.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/6c8ef5e372d13000675c6c94770730987b13e180

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Citations in the corpus

Sharing a Ride on the Commodities Roller Coaster: Common Factors in Business Cycles of Emerging Economies (2015, unknown): “[43] Kose, M.”
HAVE NATIONAL BUSINESS CYCLES BECOME MORE SYNCHRONIZED (2003, background): “12 See, among others, Gerlach (1988), Gregory, Head, and Raynauld (1997), Lumsdaine and Prasad (1999), Kose, Otrok, and Whiteman (2002), Monfort and others (2002), and Helbling and Bayoumi (2003).”
DYNAMIC FACTOR MODELS (2018, methodology): “Kose, Otrok, and Whiteman (2003, 2008) use these methods to characterize international comovements and to study international transmission of economic shocks; Kose, Otrok, and Whiteman's (2008) model has 7 common factors among 60 countries, with 3 series per country (so N = 180) and T = 30 annual…”
Measuring the frequency dynamics of financial connectedness and systemic risk (2015, unknown): “he spectral representation of variance decompositions serves the purpose. 12Common shocks driving business cycles are conrmed by large literature, e.g. Stock and Watson (2005); Canova et al. (2007); Kose et al. (2008) 13The results from unit root and cointegration testing are available upon request ”
Panel Data Models with Grouped Factor Structure Under Unknown Group Membership (2013, unknown): “Previous studies exist for grouped factor structures, where the group memberships are known, for example, Moench et al. (2012), Diebold et al. (2008), Kose et al. (2008), Wang (2010), and Moench and Ng (2011).”
International comovements, business cycle and inflation: A historical perspective (2011, methodology): “To summarize our results effectively, we follow Kose et al. (2008b) and report, for each region and subsample, the average variance share based on either (6) or (7) computed across all countries that belong to the same region.”
Will business cycles in the Euro Area converge: a critical survey of empirical research (2008, methodology): “However, Kose et al. (2003a) find no evidence of a European cycle as little of the volatility of the European aggregates can be attributed to the common European factor.”