Current Issue

Seoul Journal of Economics - Vol. 34 , No. 1

[ Article ]
Seoul Journal of EconomicsVol. 34, No. 1, pp.81-98
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 28 Feb 2021
Received 14 Dec 2020 Accepted 25 Jan 2021

Global or Country Business Cycles: Developed versus Developing Countries
Yun Jung Kim
Yun Jung Kim, Associate Professor, Department of Economics, Sogang University, 35 Baekbeom-ro, Mapo-gu, Seoul 04107, Korea, Tel: 82-2-705-8506 (

JEL Classification: C32, E32, F41, F44


Using a multi-level factor model, we estimate a global factor and country factors using the real macroeconomic variables of 71 countries from 1970 to 2018. The global factor successfully captures economic fluctuations in the world economy and primarily comoves with the business cycles of developed countries. Over time, the importance of the global factor in developed countries’ business cycles has risen, while the share of economic fluctuations accounted for by the global factor has changed little and remains low among developing countries. Financial openness appears to be particularly important in promoting the global synchronization of business cycles after 1990.

Keywords: International business cycle, Globalization, Factor model

1. Aruoba, S. B., Terrones, M., Kose, A., and Diebold, F. X. “Globalization, The Business Cycle, and Macroeconomic Monitoring.” IMF Working Paper (11/25), 2011.
2. Baxter, M., and Kouparitsas, M. A. “Determinants of Business Cycle Comovement: A Robust Analysis.” Journal of Monetary Economics 52 (No. 1 2005): 113–157.
3. Cesa-Bianchi, A., Imbs, J., and Saleheen, J. “Finance and Synchronization.” Journal of International Economics 116 (2019): 74–87.
4. Choi, I., Kim, D., Kim, Y. J., and Kwark, N. “A Multilevel Factor Model: Identification, Asymptotic Theory and Applications.” Journal of Applied Econometrics 33 (2018): 355–377.
5. Darvas, Z. “Real Effective Exchange Rates For 178 Countries: A New Database.” Bruegel Working Paper (2012/06), 2012.
6. Gregory, A., Head, A., and Reynauld, J. “Measuring World Business Cycles.” International Economic Review 38 (1997): 677–701.
7. Heathcote, J., and Perri, F. “Financial Globalization and Real Regionalization.” Journal of Economic Theory 119 (No.1 2004): 207–243.
8. Imbs, J. “Trade, Finance, Specialization, and Synchronization.” Review of Economics and Statistics 86 (No. 3 2004): 723–734.
9. Imbs, J. “The Real Effects of Financial Integration.” Journal of International Economics 68 (No. 2 2006): 296–324.
10. Kalemli-Ozcan, S., Papaioannou, E., and Peydro, J. L. “Financial Regulation, Financial Globalization, and the Synchronization of Economic Activity.” Journal of Finance 68 (No. 3 2013): 1179–1228.
11. Kose, M. A., Otrok, C., and Prasad, E. “Global Business Cycles: Convergence or Decoupling?” International Economic Review 53 (No. 2 2012): 511–538.
12. Kose, M. A., Otrok, C., and Whiteman, C. H. “International Business Cycles: World, Region, and Country-Specific Factors.” American Economic Review 93 (No. 4 2003a): 1216–1239.
13. Kose, M. A., Otrok, C., and Whiteman, C. H. “Understanding the Evolution of World Business Cycles.” Journal of International Economics 75 (2008): 110–130.
14. Kose, M. A., Prasad, E. S., and Terrones, M. E. “How Does Globalization Affect the Synchronization of Business Cycles?” American Economic Review Papers and Proceedings 93 (No. 2 2003b): 57–62.