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IZA
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How Does Globalization Affect the Synchronization of Business Cycles?
by
M. Ayhan Kose, Eswar Prasad, Marco E. Terrones
(January 2003)
published in: American Economic Review, 2003, 93 (2), 57-62
Abstract:
This paper examines the impact of rising trade and financial integration on international
business cycle comovement among a large group of industrial and developing countries. The
results provide at best limited support for the conventional wisdom that globalization has
increased the degree of synchronization of business cycles. The evidence that trade and
financial integration enhance global spillovers of macroeconomic fluctuations is mostly limited
to industrial countries. One striking result is that, on average, cross-country consumption
correlations have not increased in the 1990s, precisely when financial integration would have
been expected to result in better risk-sharing opportunities, especially for developing
countries.
Text: See Discussion Paper No. 702 
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