Globalization and Business Cycle Transmission

31 Pages Posted: 18 Dec 2008

See all articles by Michael J. Artis

Michael J. Artis

University of Manchester - Institute for Political & Economic Governance (IPEG)

Toshihiro Okubo

University of Geneva - Graduate Institute of International Studies (HEI)

Date Written: November 2008

Abstract

The paper uses long-run GDP data for developed countries drawn from Maddison (2003) to generate deviation cycles for the period from 1870 to 2001. The cyclical deviates are examined for their bilateral cross-correlation values in three separate periods, those of the first globalization wave (1870 to 1914), the period of the "bloc economy" (1915 to 1959) and for the period of the second globalization (1960-2001). Cluster analysis is applied and the McNemar test is used to test for the relative coherence of alternative groupings of countries in the three periods. The bloc economy period emerges as one that features some well-defined sub-global clusters, where the second globalization period does not, the first globalization period lying between the two in this respect. The second globalization period shows a generally higher level of cross correlations and a lower variance than the other two periods. The features uncovered suggest that the second globalization period is indeed one that comprises a more inclusive world economy than ever before.

Keywords: bloc economy, business cycle, cluster analysis, globalization, McNemar Test

JEL Classification: E32, F0, F15, F41, N10

Suggested Citation

Artis, Michael J. and Okubo, Toshihiro, Globalization and Business Cycle Transmission (November 2008). CEPR Discussion Paper No. DP7041, Available at SSRN: https://ssrn.com/abstract=1311165

Michael J. Artis (Contact Author)

University of Manchester - Institute for Political & Economic Governance (IPEG) ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Toshihiro Okubo

University of Geneva - Graduate Institute of International Studies (HEI) ( email )

PO Box 136
Geneva, CH-1211
Switzerland
+41 22 908 5900 (Phone)

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