Determinants of Business Cycle Comovement: A Robust Analysis
68 Pages Posted: 8 Oct 2004
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Determinants of Business Cycle Comovement: A Robust Analysis
Determinants of Business Cycle Comovement: A Robust Analysis
Date Written: August 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.
Keywords: International business cycles, comovement, international trade, currency unions
JEL Classification: F33, F41
Suggested Citation: Suggested Citation
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