Are They All in the Same Boat? The 2000-2001 Growth Slowdown and the G-7 Business Cycle Linkages

42 Pages Posted: 29 Jan 2006

See all articles by Thomas Helbling

Thomas Helbling

International Monetary Fund (IMF) - Middle East and Central Asia Department

Tamim Bayoumi

International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

Date Written: March 2003

Abstract

This paper reviews the international business cycle among Group of Seven (G-7) countries since 1973 from two angles. An examination of business cycle synchronization among these countries using simple descriptive statistics shows that synchronized slowdowns have been the norm rather than the exception and that the slowdown in 2000-2001 largely followed patterns seen in the past. The paper also identifies the international business cycle with an asymptotic dynamic factor model. Two global factors explain roughly 80 percent of the variance in G-7 output gaps at business cycle frequencies. The factor model decomposes the "common part" of national output fluctuations into two factors, one capturing the average G-7 cycle and one that corrects for phase and amplitude differences. We also found some evidence supporting the hypothesis that global shocks were the main force behind the slowdown in 2000-2001.

Keywords: Business Cycles, International Business Cycles, Dynamic Factor Models

JEL Classification: C57, E32, F41, F47

Suggested Citation

Helbling, Thomas and Bayoumi, Tamim, Are They All in the Same Boat? The 2000-2001 Growth Slowdown and the G-7 Business Cycle Linkages (March 2003). IMF Working Paper, Vol. , pp. 1-42, 2003. Available at SSRN: https://ssrn.com/abstract=879121

Thomas Helbling (Contact Author)

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Tamim Bayoumi

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6333 (Phone)
202-623-4795 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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