Common Shocks, Common Dynamics, and the International Business Cycle

Hecq AlainCubadda GianlucaCentoni Marco
CEIS Research Paper
This paper proposes an econometric framework to assess the importance of common shocks and common transmission mechanisms in generating international business cycles. Then we show how to decompose the cyclical effects of permanent-transitory shocks into those due to their domestic and those due to foreign components. Our empirical analysis reveals that the business cycles of the US, Japan, Canada are clearly dominated by their domestic components. The Euro area is more sensitive to foreign shocks compared to the other three countries of our analysis.
Number: 106
Keywords: International business cycles; Permanent-transitory decomposition; Serial correlation common features; Frequency domain analysis.
JEL codes: C32, E32
Date: Monday, July 7, 2008
Revision Date: Monday, July 7, 2008