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GLOBAL BUSINESS CYCLES: CONVERGENCE OR DECOUPLING? *
Author(s) -
Kose M. Ayhan,
Otrok Christopher,
Prasad Eswar
Publication year - 2012
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2012.00690.x
Subject(s) - business cycle , decoupling (probability) , economics , convergence (economics) , divergence (linguistics) , emerging markets , econometrics , dynamic factor , monetary economics , macroeconomics , linguistics , philosophy , control engineering , engineering
We analyze the evolution of the degree of global cyclical interdependence over the period 1960–2008. Using a dynamic factor model, we decompose macroeconomic fluctuations in output, consumption, and investment into a global factor, factors specific to country groups, and country‐specific factors. We find that during 1985–2008, there is some convergence of business cycle fluctuations among industrial economies and among emerging market economies. Surprisingly, there is a concomitant decline in the relative importance of the global factor. We conclude that there is evidence of business cycle convergence within each of these two groups of countries but divergence (or decoupling) between them.