and seminar participants for useful comments. The views expressed in this paper are those of the authors and do not necessarily represent those of the IMF, IMF policy, or the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
This paper studies the changes in world business cycles during the period 1960-2001. We employ a Bayesian dynamic latent factor model to estimate common components in the main macroeconomic aggregates (output, consumption, and investment) of the G7 countries. Using the model, we estimate common and country-specific factors. These factors are used to quantify the relative importance of the common and country components in explaining comovement in each observable aggregate over three distinct time periods: the Bretton Woods (BW) period (1960:1-1972:2), the period of common shocks (1972:3-1986:2), and the globalization period (1986:3-2001:4). We also study how different types of shocks have affected the nature of business cycle comovement over these three periods. We find that the common factor explains a larger fraction of output, consumption and investment volatility in the globalization period than it does in the BW period. The common factor also accounts for a larger fraction of investment variation in the period of globalization than it does in the common shock period. Movements in interest rates seem to be the predominant source of comovement for most countries, with oil prices playing a critical role in Japan and to a lesser extent in the U.K. during the common shock period. The main driver of observed comovement in the globalization period remains unidentified, leaving open the possibility that it involves productivity shocks.ϒ We would like to thank Linda Tesar, Prakash Loungani and Pre-Conference participants for useful suggestions.
This paper presents a comprehensive crosscountry database of …scal space, broadly de…ned as the availability of budgetary resources for a government to service its …nancial obligations. The database covers up to 200 countries over the period 1990-2016, and includes 28 indicators of …scal space grouped into four categories: debt sustainability, balance sheet vulnerability, external and private sector debt related risks as potential causes of contingent liabilities, and market access. We illustrate potential applications of the database by analyzing developments in …scal space across three time frames: over the past quarter century; during …nancial crises; and during oil price plunges. The main results are as follows. First, …scal space had improved in many countries before the global …nancial crisis. In advanced economies, following severe deteriorations during the crisis, many indicators of …scal space have virtually returned to levels in the mid-2000s. In contrast, …scal space has shrunk in many emerging market and developing economies since the crisis. Second, …nancial crises tend to coincide with deterioration in multiple indicators of …scal space, but they are often followed by reduced reliance on short-term borrowing. Finally, …scal space narrows in energy-exporting emerging market and developing economies during oil price plunges but later expands, often because of procyclical …scal tightening and, in some episodes, a recovery in oil prices.
This paper examines the importance of credit market shocks in driving global business cycles over the period 1988:1-2009:4. We first estimate common components in various macroeconomic and financial variables of the G-7 countries. We then evaluate the role played by credit market shocks using a series of VAR models. Our findings suggest that these shocks have been influential in driving global activity during the latest global recession. Credit shocks originating in the United States also have a significant impact on the evolution of world growth during global recessions.
Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: Both global and regional economic linkages have strengthened substantially over the past quarter century. We employ a dynamic factor model to analyze the implications of these linkages for the evolution of global and regional business cycles. Our model allows us to assess the roles played by the global, regional, and country-specific factors in explaining business cycles in a large sample of countries and regions over the period 1960-2010. We find that, since the mid-1980s, the importance of regional factors has increased markedly in explaining business cycles especially in regions that experienced a sharp growth in intra-regional trade and financial flows. By contrast, the relative importance of the global factor has declined over the same period. In short, the recent era of globalization has witnessed the emergence of regional business cycles. Terms of use: Documents in EconStor may JEL Classification 2 EXECUTIVE SUMMARYThe inexorable forces of globalization and regionalization have reshaped the world economic landscape over the past quarter century. Global trade and financial flows have registered unprecedented growth during this period. Intra-regional economic linkages have also become much stronger with the proliferation of regional trade agreements and common currency areas.These developments have appeared to affect the evolution of global and regional business cycles in unexpected ways. For example, despite the presence of strong global trade and financial linkages, there was significant variation in growth performance across different regions during the 2008-09 global financial crisis. Specifically, some regions (e.g., Asia) exhibited surprising resilience during the worst of the financial crisis and rapidly returned to high growth whereas some others (e.g., North America and Europe) experienced deep and prolonged contractions.These observations lead to a basic question: "Have regional elements become more important in driving business cycles in an era of globalization?" We answer this question using a dynamic factor model. Our model allows us to analyze the sources of fluctuations in output, consumption, and investment in a sample of 106 countries over the period 1960-2010. We consider cycles in seven regions: North America, Europe, Oceania, Asia, Latin America and the Caribbean, Middle East and North Africa, and Sub-Saharan Africa.Our results point to a surprising conclusion: The recent era of globalization has witnessed the emergence...
The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
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