Determinants of Business Cycle Comovement: A Robust Analysis

61 Pages Posted: 30 Sep 2004 Last revised: 26 Oct 2022

See all articles by Marianne Baxter

Marianne Baxter

Boston University - Department of Economics; National Bureau of Economic Research (NBER)

Michael A. Kouparitsas

Federal Reserve Bank of Chicago

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Date Written: September 2004

Abstract

This paper investigates the determinants of business cycle comovement between countries. Our dataset includes over 100 countries, both developed and developing. We search for variables that are robust' in explaining comovement, using the approach of Leamer (1983). Variables considered are (i) bilateral trade between countries; (ii) total trade in each country; (iii) sectoral structure; (iv) similarity in export and import baskets; (v) factor endowments; and (vi) gravity variables. We find that bilateral trade is robust. However, two variables that the literature has argued are important for business cycles industrial structure and currency unions are found not to be robust.

Suggested Citation

Baxter, Marianne and Kouparitsas, Michael A., Determinants of Business Cycle Comovement: A Robust Analysis (September 2004). NBER Working Paper No. w10725, Available at SSRN: https://ssrn.com/abstract=586644

Marianne Baxter (Contact Author)

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Michael A. Kouparitsas

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