Finance and Synchronization

37 Pages Posted: 20 Jan 2016

See all articles by Ambrogio Cesa-Bianchi

Ambrogio Cesa-Bianchi

Bank of England

Jean M. Imbs

Paris School of Economics (PSE); NYU Abu Dhabi; Centre for Economic Policy Research (CEPR)

Jumana Saleheen

Bank of England

Multiple version iconThere are 2 versions of this paper

Date Written: January 2016

Abstract

It is well known that the bulk of international financial flows across countries are driven by common shocks. In response to these common shocks, we find that capital tends to flow systematically between the same types of countries, while the discrepancy between GDP growth rates widens. Thus, in the data synchronization falls when financial linkages rise, but only so in response to common shocks. In contrast, financial linkages tend to increase the synchronization of business cycles in response to purely country-specific shocks.

Keywords: Business Cycle Synchronization, Common Shocks, Contagion, Financial Linkages, Idiosyncratic Shocks

JEL Classification: E32, F15, F36, G21, G28

Suggested Citation

Cesa-Bianchi, Ambrogio and Imbs, Jean M. and Saleheen, Jumana, Finance and Synchronization (January 2016). CEPR Discussion Paper No. DP11037, Available at SSRN: https://ssrn.com/abstract=2717586

Ambrogio Cesa-Bianchi (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

HOME PAGE: http://https://sites.google.com/site/ambropo/

Jean M. Imbs

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

NYU Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Jumana Saleheen

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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