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 yunjungk@sogang.ac.kr

JEL Classification: C32, E32, F41, F44

Abstract

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

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