Trade, Finance, Specialization, and Synchronization

By Jean Imbs. Review of Economics and Statistics, 2003

869 citations recorded by the source corpus.

I investigate the determinants of business cycle synchronization across regions. The linkages between trade in goods, financial openness, specialization, and business cycle synchronization are evaluated in the context of a system of simultaneous equations. The main results are as follows. (i) Specialization patterns have a sizable effect on business cycles. Most of this effect is independent of trade or financial policy, but directly reflects differences in GDP per capita. (ii) A variety of measures of financial integration suggest that economic regions with strong financial links are significantly more synchronized, even though they also tend to be more specialized. (iii) The estimated role of trade is closer to that implied by existing models once intra-industry trade is held constant. The results obtain in a variety of data sets, measurement strategies, and specifications. They relate to a recent strand of international business cycle models with incomplete markets and transport costs and, on the empirical side, point to an important omission in the list of criteria defining an optimal currency area, namely, specialization patterns.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/6d4f88e3ac47824401d90a904a79fd72f475656a

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

Housing Cycles and Macroeconomic Fluctuations: A Global Perspective (2012, background): “Trade linkages play an important role in the transmission of shocks across country borders and for international business cycle synchronization, as documented by Forbes and Chinn (2004), Imbs (2004), Baxter and Kouparitsas (2005) and Kose and Yi (2006).”
Financial Regulation, Financial Globalization and the Synchronization of Economic Activity (2009, methodology): “Using country-level data Imbs (2004) and Kalemli-Ozcan, Sørensen, and Yosha (2001) show that higher industrial specialization leads to less synchronized cycles.”
Emerging Asia: Decoupling or Recoupling (2011, neutral): “On the other hand, if capital flows are correlated internationally, closer financial integration leads to greater output synchronization (Imbs 2004).”
Breaks in the Variability and Comovement of G-7 Economic Growth (2003, background): “See Canova and Dellas (1993), Frankel and Rose (1998), Anderson, Kwark, and Vahid (1999), Imbs (1999, 2004), Clark and van Wincoop (2001), Otto, Voss, and Willard (2001), Gruben, Koo, and Millis (2002), and Calderon, Chong, and Stein (2003).”
HAVE NATIONAL BUSINESS CYCLES BECOME MORE SYNCHRONIZED (2003, methodology): “Using data from Mitchell (1998a,1998b, and 1998c) for the Gold Standard and the interwar period and from the IMF’s Direction of Trade Statistics for the Bretton Woods era and 30 See, for example, Frankel and Rose (1998), Otto, Voss, and Willard (2001), and Imbs (2003).”
International Investment Patterns (2008, neutral): “The pattern of bilateral financial linkages may influence the matrix of correlations in asset prices (Forbes and Chinn 2003) and may also affect the degree of business cycle synchronization (Imbs 2004a, 2004b).”
Trade and Business Cycle Synchronization in OECD Countries: A Re-Examination (2008, neutral): “…can be grouped into the following categories: (1) specialization (see, e.g., Kalemli-Ozcan et al., 2001); (2) monetary integration (see, e.g., Rose and Engel, 2002); (3) financial integration (see, e.g., Imbs, 2004); and (4) similarity of fiscal policies (see, e.g., Clark and van Wincoop, 2001).”
Testing for Structural Breaks in Dynamic Factor Models (2011, background): “…of business cycles) (Frankel and Rose 1998): as a consequence of the events, transaction costs have declined, and this should spur the processes of greater trade and financial integration and hence greater business cycle comovements (cf. Imbs 2004, Kose et al. 2003, Baxter and Kouparitsas 2005).”
The First Global Recession in Decades (2010, methodology): “In line with the results in Imbs (2004, 2006), so is a2, although not systematically.”
Stock market synchronization and monetary integration (2011, background): “Imbs (2004, 2006) and Kose et al. (2003) show that financial integration impacts positively on business cycle comovements.”
The Impact of the Global Financial Crisis on Business Cycles in Asian Emerging Economies (2010, neutral): “by Imbs (2004). 2 Kočenda and Hanousek (1998) document a high degree of convergence and integration of the Eastern Asian capital markets.”
Interconnectedness in the global financial market (2017, neutral): “These e ﬀ ects depend on sim-3 ilarities in industry structure, although this is often overshadowed by country-speciﬁc e ﬀ ects (Imbs, 2004).”
Endogeneities of Optimum Currency Areas: What Brings Countries Sharing a Single Currency Closer Together? (2005, neutral): “In this connection, Jean and Nicoletti (2002) find a significant relationship between product market regulations in several sectors and wage premia.”