Trade and Business Cycle Synchronization in OECD Countries: A Re-Examination

By R. Inklaar, Richard Jong-A-Pin, Jakob de Haan. Social Science Research Network, 2008

407 citations recorded by the source corpus.

This paper re-examines the relationship between trade intensity and business cycle synchronization for 21 OECD countries during 1970-2003. Instead of using instrumental variables, we estimate a multivariate model including variables capturing specialisation, financial integration, and similarity of economic policies. We confirm that trade intensity affects business cycle synchronization, but the effect is much smaller than previously reported. Other factors in our model have a similar impact on business cycle synchronization as trade intensity. Finally, we find that the effect of trade on business cycle synchronisation is not driven by outliers and does not suffer from parameter heterogeneity.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/995d7810303f2283683d6016fb072621965b38a3

Citations in the corpus

• Will business cycles in the Euro Area converge: a critical survey of empirical research (2008, unknown): “An exception is the work by Kalemli-Ozcan et al. (2001), who argue that a natural measure of asymmetry quantifies the potential loss of welfare due to asymmetric GDP fluctuations in the absence of risksharing mechanisms.”
• Regional business cycle synchronization in Europe? (2007, unknown): “As economic policies in the euro area have become similar than before the start of the currency union and are likely to become even more similar, business cycle synchronization will increase (Inklaar et al., 2007).”
• Does Terror Threaten Human Rights? Evidence from Panel Data (2007, unknown): “CDF(0) indicates the larger of the areas under the density function either above or below zero; 21 For instance, de Haan and Sturm (2000), Inklaar et al. (2005), and Sturm et al. (2005).”