Determinants of Business Cycle Comovement: A Robust Analysis

68 Pages Posted: 8 Oct 2004

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: 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

Baxter, Marianne and Kouparitsas, Michael A., Determinants of Business Cycle Comovement: A Robust Analysis (August 2004). Available at SSRN: https://ssrn.com/abstract=601101 or http://dx.doi.org/10.2139/ssrn.601101

Marianne Baxter

Boston University - Department of Economics ( email )

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Michael A. Kouparitsas (Contact Author)

Federal Reserve Bank of Chicago ( email )

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