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What Are the Driving Forces of International Business Cycles?

Author

Listed:
  • Mario J. Crucini

    (Department of Economics, Keynes College, University of Kent)

  • M. Ayhan Kose

    (Financial Studies Division, Research Department, International Monetary Fund)

  • Christopher Otrok

    (Department of Economics, University of Virginia)

Abstract

We examine the driving forces of G-7 business cycles. We decompose national business cycles into common and nation-specific components using a dynamic factor model. We also do this for driving variables found in business cycle models: productivity; measures of fiscal and monetary policy; the terms of trade and oil prices. We find a large common factor in oil prices, productivity, and the terms of trade. Productivity is the main driving force, with other drivers isolated to particular nations or sub-periods. Along these lines, we document shifts in the correlation of the G-7 component of each driver with the overall G-7 cycle.

Suggested Citation

  • Mario J. Crucini & M. Ayhan Kose & Christopher Otrok, 2008. "What Are the Driving Forces of International Business Cycles?," Vanderbilt University Department of Economics Working Papers 0815, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:0815
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    References listed on IDEAS

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    More about this item

    Keywords

    International business cycle; Bayesian factor model; productivity monetary policy; fiscal policy;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F00 - International Economics - - General - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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