Financial Openness and Business Cycle Volatility

Kiel Institute of World Economics Working Paper No. 1121

39 Pages Posted: 10 Aug 2002

See all articles by Christian Pierdzioch

Christian Pierdzioch

Saarland University - Department of Economics and Statistics

Claudia M. Buch

Deutsche Bundesbank

Jörg Döpke

Deutsche Bundesbank

Date Written: July 2002

Abstract

This paper discusses whether the integration of international financial markets affects business cycle fluctuations. In the framework of a new open economy macro-model, we show that the link between financial openness and business cycle volatility depends on the nature of the underlying shock. Empirical evidence supports this conclusion. Our results also show that the link between business cycle volatility and financial openness has not been stable over time.

Keywords: Open Economy Macroeconomics, Monetary union; Business cycles, Financial markets

JEL Classification: F33, F36, F41

Suggested Citation

Pierdzioch, Christian and Buch, Claudia M. and Döpke, Jörg, Financial Openness and Business Cycle Volatility (July 2002). Kiel Institute of World Economics Working Paper No. 1121, Available at SSRN: https://ssrn.com/abstract=319520 or http://dx.doi.org/10.2139/ssrn.319520

Christian Pierdzioch (Contact Author)

Saarland University - Department of Economics and Statistics ( email )

P.O. Box 151150
D-66041 Saarbruecken
Germany
+49 681 302 58195 (Phone)
+49 681 302 58193 (Fax)

Claudia M. Buch

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Jörg Döpke

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany
+49-069-9566-3051 (Phone)