Globalization, the Business Cycle, and Macroeconomic Monitoring
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 G-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 G-7 real activity factor, explains a significant amount of cross-country variation and tracks the major global cyclical events of the past forty years. Second, the common G-7 factor and the idiosyncratic country factors play different roles at different times in shaping national economic activity. Finally, the degree of G-7 business cycle synchronization among country factors has changed over time.
For helpful comments on earlier drafts and earlier related material, we thank conference and seminar participants at the NBER International Seminar on Macroeconomics Amsterdam, the Bank of Canada, Queen's University, and the Federal Reserve Bank of Atlanta. Special thanks go to Richard Clarida, Allan Gregory, Lucrezia Reichlin and Kenneth West. For research support we thank the National Science Foundation and the Real-Time Data Research Center at the Federal Reserve Bank of Philadelphia. The views expressed in this paper are those of the authors and do not necessarily represent those of the IMF or of the National Bureau of Economic Research.
S. Borağan Aruoba & Francis X. Diebold & M. Ayhan Kose & Marco E. Terrones, 2011. "Globalization, the Business Cycle, and Macroeconomic Monitoring," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 7(1), pages 245 - 286.
Globalization, the Business Cycle, and Macroeconomic Monitoring, S. Borağan Aruoba, Francis X. Diebold, M. Ayhan Kose, Marco E. Terrones. in NBER International Seminar on Macroeconomics 2010, Clarida and Giavazzi. 2011