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Globalization, the Business Cycle, and Macroeconomic Monitoring

53 Pages Posted: 7 Feb 2011  

M. Ayhan Kose

Development Prospects Group at the World Bank

S. Borağan Aruoba

University of Maryland - Department of Economics

Marco E. Terrones

International Monetary Fund (IMF)

Francis X. Diebold

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2011

Abstract

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.

Keywords: Business cycles, Cross country analysis, Globalization, Group of seven

Suggested Citation

Kose, M. Ayhan and Aruoba, S. Borağan and Terrones, Marco E. and Diebold, Francis X., Globalization, the Business Cycle, and Macroeconomic Monitoring (February 2011). IMF Working Papers, Vol. , pp. 1-52, 2011. Available at SSRN: https://ssrn.com/abstract=1755442

M. Ayhan Kose

Development Prospects Group at the World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

S. Boragan Aruoba (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3508 (Phone)
301-405-3542 (Fax)

Marco E. Terrones

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4329 (Phone)

HOME PAGE: http://imf.org/external/np/CV/AuthorCV.aspx?AuthID=171

Francis X. Diebold

University of Pennsylvania - Department of Economics ( email )

160 McNeil Building
3718 Locust Walk
Philadelphia, PA 19104
United States
215-898-1507 (Phone)
215-573-4217 (Fax)

HOME PAGE: http://www.ssc.upenn.edu/~fdiebold/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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