The International Business Cycle in a Changing World: Volatility and the Propagation of Shocks in the G-7

Pérez, Olga Gómez; Osborn, Denise R.; Artis, Michael J.

doi:10.1007/s11079-006-6811-8

Cited by 21 publications

(19 citation statements)

References 20 publications

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“…As shown by the close correspondence between the dotted and dashed lines, there is little difference in the transmission of U.S. shocks to other regions when the magnitude of shocks is held constant. The ''great moderation'' in U.S. macroeconomic volatility cuts U.S. spillovers to other regions by a half, but the response of the other economies to a U.S. shock of a given size has remained relatively constant, consistent with the findings of Stock and Watson (2005) and Perez, Osborn, and Artis (2006).…”

Section: Results By Subsamplesupporting

confidence: 78%

“…The basic VARs contain GDP growth for each of the four regions. Four lags were used in the VAR, following Perez, Osborn, and Artis (2006) and Stock and Watson (2005). 5 A major focus of the empirical analysis is examining the robustness of the results to alternative orderings of the contemporaneous correlations across shocks in the VAR.…”

Section: How Large Are Spillovers?mentioning

confidence: 99%

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Foreign Entanglements: Estimating the Source and Size of Spillovers Across Industrial Countries

Bayoumi¹,

Swiston²

2008

IMF Staff Pap

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Vector autoregressions of real growth since 1970 are used to estimate spillovers between the United States, the euro area, Japan, and an aggregate of smaller countries proxying for global shocks. U.S. and global shocks generate significant spillovers, but those from the euro area and Japan are small. This paper calculates the standard errors of impulse-response functions, including uncertainty over the proper Cholesky ordering. Extensions adding exports, commodity prices, and financial variables indicate that financial effects are the largest source of spillovers. The results by subperiod underline the importance of the great moderation in U.S. output fluctuations and associated financial stability in lowering output volatility elsewhere. IMF Staff Papers (2009) 56, 353–383. doi:10.1057/imfsp.2008.23; published online 9 September 2008

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Section: Results By Subsamplesupporting

confidence: 78%

Section: How Large Are Spillovers?mentioning

confidence: 99%

Foreign Entanglements: Estimating the Source and Size of Spillovers Across Industrial Countries

Bayoumi¹,

Swiston²

2008

IMF Staff Pap

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“…Also, Osborn et al (2005) argued that the US growth rates have positive and significant impacts on Germany, Italy and the UK. Perez, Osborn, and Artis (2003) found that the US economy leads the German economy.…”

Section: Empirical Analysismentioning

confidence: 99%

On the transmission of economic fluctuations from the USA to EU-15 (1960–2011)

Michaelides

Papageorgiou

2012

Journal of Economics and Business

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“…Crucini et al (2008 also obtain that G7 shocks have the highest share (80 percent) in output growth variance of France among the G7 countries. Finally, the country-specific shocks have only a limited share in the output growth variance of France, while US and (even much more) EU15 shocks have large weights in that variance according to the findings of Perez et al (2006). Note that there are important differences between our empirical approach and the empirical approach of the aforementioned studies.…”

Section: Discussionmentioning

confidence: 93%

“…2 This approach alone 1 Stock and Watson (2005) and Canova et al (2007) estimate, for example, common shocks and countryspecific shocks with spillover effects within the G7 group. Perez et al (2006) identify US, EU15 and countryspecific shocks. Crucini et al (2008) model common G7, nation-specific and idiosyncratic factors.…”

Section: Introductionmentioning

confidence: 99%

The Role of Structural Common and Country-Specific Shocks in the Business Cycle Dynamics of the G7 Countries

Seymen

Kappler

2009

SSRN Journal

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp09015.pdf Non-Technical SummaryThe study analyses business cycles of the G7 countries in a structural vector autoregression (SVAR) framework with common factors. A multitude of studies which investigate the driving forces of international business cycles distinguish between common and country-specific shocks, while the identified shocks are not given an economic interpretation.The main advantage of our approach vis-à-vis other empirical approaches is that we consider three types of structural shocks -supply, demand and nominal-that contain (unobserved) common and country-specific elements. Such a modelling approach is in line with a class of theoretical international business cycle models that trace international linkages back to common exogenous shocks.We first establish that output cycles of the G7 countries have generally been highly correlated, but a recent increase in the cycle synchronisation is not observed. Nominal interest rate growth is found to be moderately correlated in the G7 group, and since the mid-1990s a gradual increase in synchronisation took place. Inflation growth, however, has always been a rather country-specific phenomenon according to our findings.In order to assess the similarity of the shock propagation mechanisms in the G7 countries, we compute correlations that would have been observed if the countries were subject to common shocks only. We find that we would generally observe much higher correlations of the cyclical measures if only common shocks occurred or if common shocks had a larger share in the variance of the cycles. Japan is an exception to this rule.Common supply shocks are the only important contributor to output fluctuations within the class of common shocks and the main driving force of synchronisation. Country-specific nominal shocks contribute to the output cycle variance only in Canada, Italy and the US, and country-specific demand shocks only in the US. The weights of nominal and demand shocks are negligible for all other G7 countries. The G7 countries do not differ much in terms of shock propagation with respect to inflation growth, but they are subject to large asymmetric shocks. This explains the low correlations of inflation growth in the G7 group.The total share of common shocks is generally relatively high in the G7 countries' nominal interest rate growth, which explains the strong correlation among the G7 countries' nomin...

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The International Business Cycle in a Changing World: Volatility and the Propagation of Shocks in the G-7

Cited by 21 publications

References 20 publications

Foreign Entanglements: Estimating the Source and Size of Spillovers Across Industrial Countries

Foreign Entanglements: Estimating the Source and Size of Spillovers Across Industrial Countries

On the transmission of economic fluctuations from the USA to EU-15 (1960–2011)

The Role of Structural Common and Country-Specific Shocks in the Business Cycle Dynamics of the G7 Countries

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