Globalization, the Business Cycle, and Macroeconomic Monitoring
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We propose and implement a framework for characterizing and monitoring the global business cycle. Our framework utilizes high-frequency data, allows us to account for a potentially large amount of missing observations, and is designed to facilitate the updating of global activity estimates as data are released and revisions become available. We apply the framework to the Group of 7 countries and study various aspects of national and global business cycles, obtaining three main results. First, our measure of the global business cycle, the common G7 real activity factor, explains a significant amount of cross-country variation and tracks the major global cyclical events of the past 40 years. Second, the common G7 factor and the idiosyncratic country factors play different roles at different times in shaping national economic activity. Finally, the degree of G7 business cycle synchronization among country factors has changed over time.