Trade and Business Cycle Synchronization in OECD Countries: A Re-Examination

43 Pages Posted: 24 Oct 2005

See all articles by Robert Inklaar

Robert Inklaar

University of Groningen - Department of Economics

Richard Jong-A-Pin

University of Groningen - Department of Economics (Economie)

Jakob de Haan

University of Groningen - Faculty of Economics and Business; CESifo (Center for Economic Studies and Ifo Institute); De Nederlandsche Bank

Date Written: September 2005

Abstract

This paper re-examines the relationship between trade intensity and business cycle synchronization for 21 OECD countries during 1970-2003. Instead of using instrumental variables, we estimate a multivariate model including variables capturing specialisation, financial integration, and similarity of economic policies. We confirm that trade intensity affects business cycle synchronization, but the effect is much smaller than previously reported. Other factors in our model have a similar impact on business cycle synchronization as trade intensity. Finally, we find that the effect of trade on business cycle synchronisation is not driven by outliers and does not suffer from parameter heterogeneity.

Keywords: business cycles, trade, synchronization of business cycles

JEL Classification: E32, F42

Suggested Citation

Inklaar, Robert and Jong-A-Pin, Richard and de Haan, Jakob, Trade and Business Cycle Synchronization in OECD Countries: A Re-Examination (September 2005). CESifo Working Paper Series No. 1546, Available at SSRN: https://ssrn.com/abstract=832985 or http://dx.doi.org/10.2139/ssrn.832985

Robert Inklaar

University of Groningen - Department of Economics ( email )

P.O. Box 800
9700 AV Groningen
Netherlands

Richard Jong-A-Pin

University of Groningen - Department of Economics (Economie) ( email )

P.O. Box 800
9700 AV Groningen
Netherlands

Jakob De Haan (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

PO Box 800
Groningen, 9700 AV
Netherlands
+31 0 50 3633706 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

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