International Business Cycles: World, Region, and Country-Specific Factors

• Published in: The American economic review Vol. 93; no. 4; pp. 1216 - 1239
• Main Authors: Kose, M. Ayhan, Otrok, Christopher, Whiteman, Charles H.
• Format: Journal Article
• Language: English
• Published: Nashville American Economic Association 01-09-2003
• Subjects: Aggregates; Bayesian analysis; Business cycles; Consumption; Correlations; Countries; Econometrics; Economic activity; Economic development; Economic fluctuations; Economic investment; Economic models; Economic policy; Economic theory; Gross domestic product; Industrialized nations; International; International business; International economics; Macroeconomics; National economy; Random variables; Recessions; Regional economics; Regions; Statistical variance; Studies; Time series; World economy
• ISSN: 0002-8282; 1944-7981
• DOI: 10.1257/000282803769206278

The paper investigates the common dynamic properties of business-cycle fluctuations across countries, regions, and the world. We employ a Bayesian dynamic latent factor model to estimate common components in macroeconomic aggregates (output, consumption, and investment) in a 60-country sample covering seven regions of the world. The results indicate that a common world factor is an important source of volatility for aggregates in most countries, providing evidence for a world business cycle. We find that region-specific factors play only a minor role in explaining fluctuations in economic activity. We also document similarities and differences across regions, countries, and aggregates.