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Title:International business cycle spillovers PDF Logo
Authors:Yilmaz, Kamil
Issue Date:2009
Series/Report no.:TÜSİAD-Koç University Economic Research Forum working paper series 0903
Abstract:We apply Diebold-Yilmaz spillover index methodology to monthly industrial production indices to study business cycle interdependence among G-6 industrialized countries since 1958. The business cycle spillover index fluctuates substantially over time, increasing especially after the 1973-75, 1981-82 and 2001 U.S. recessions. The band within which the spillover index fluctuates has widened since the start of the globalization process in the early 1990s. Our most important result, however, concerns the current state of the world economy: In a matter of four months from September to December 2008, the business cycle spillover index recorded the sharpest increase ever, reaching a record level as of December 2008 (See http://data.economicresearchforum.org/erf/bcspill.aspx?lang=en for updates of the spillover plot). Focusing on directional spillover measures, we show that in the current episode the shocks are mostly originating from the United States and spreading to other industrialized countries. We also show that, throughout the period of analysis, the U.S. (1980s and 2000s) and Japan (1970s and 2000s) have been the major transmitters of shocks among the industrialized countries.
Subjects:Business Cycles
Spillovers
Industrial Production
Vector Autoregression
Variance Decomposition
Unit Roots
Cointegration
JEL:E32
F41
C32
Document Type:Working Paper
Appears in Collections:ERF Working Paper Series, TÜSİAD-Koç University Economic Research Forum (ERF)

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