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Discussion Paper Details

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Title: The International Business Cycle in a Changing World: Volatility and the Propagation of Shocks in the G-7

Author(s): Michael J Artis, Denise Osborn and Pedro Perez-Vazquez

Publication Date: October 2004

Keyword(s): european integration, international business cycles, time variation and volatility

Programme Area(s): International Macroeconomics

Abstract: This Paper examines the changing relationships between the G7 countries through VAR models for the quarterly growth rates, estimated both over sub-periods and using a rolling data window. Six trivariate models are estimated, all of which include the US and a European (E15) aggregate. In relative terms, the conditional volatility of E15 growth has declined more since 1980 than the well-documented decline for the US. The propagation of shocks has also changed, with the volatility and propagation effects separated by applying shocks of pre-1980 magnitude to VARs estimated over various periods. Rolling estimation reveals that E15 has a steadily increasing impact on the US economy over time, while the effects of the US on Europe have been largest during the 1970s and the late 1990s.

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Bibliographic Reference

Artis, M, Osborn, D and Perez-Vazquez, P. 2004. 'The International Business Cycle in a Changing World: Volatility and the Propagation of Shocks in the G-7'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4652