Working Paper

Determinants of business cycle comovement: a robust analysis


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: Business cycles; Trade;

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Authors

    Baxter, Marianne

    Kouparitsas, Michael A.

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series

Publication Date: 2004

Number: WP-04-14