How Does Globalization Affect the Synchronization of Business Cycles?

14 Pages Posted: 28 Jan 2006  

M. Ayhan Kose

Development Prospects Group at the World Bank

Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management; Cornell University - Department of Economics; Brookings Institution; NBER; IZA Institute of Labor Economics

Marco E. Terrones

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2003

Abstract

This paper examines the impact of rising trade and financial integration on international business cycle comovement among a large group of industrial and developing countries. The results provide at best limited support for the conventional wisdom that globalization has increased the degree of synchronization of business cycles. The evidence that trade and financial integration enhance global spillovers of macroeconomic fluctuations is stronger for industrial countries. One striking result is that, on average, cross-country consumption correlations have not increased in the 1990s, precisely when financial integration would have been expected to result in better risk-sharing opportunities, especially for developing countries.

Keywords: Macroeconomic fluctuations, trade and financial integration, output and consumption comovement

JEL Classification: E32, F41, F42

Suggested Citation

Kose, M. Ayhan and Prasad, Eswar S. and Terrones, Marco E., How Does Globalization Affect the Synchronization of Business Cycles? (January 2003). IMF Working Paper, Vol. , pp. 1-14, 2003. Available at SSRN: https://ssrn.com/abstract=879102

M. Ayhan Kose (Contact Author)

Development Prospects Group at the World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management ( email )

440 Warren Hall
Ithaca, NY 14853
United States

HOME PAGE: http://prasad.aem.cornell.edu

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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

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