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GEMF

Grupo de Estudos Monetários e Financeiros

Estudos do GEMF, N.º 19 de 2014

   

Business Cycle Synchronization and Volatility Shifts


Pedro André Cerqueira
Faculdade de Economia da Universidade de Coimbra e GEMF

Abstract:
This paper evaluates the impact of volatility shifts on different time varying period-by-period indexes which are used in the literature to study cross-country synchronization. Using GDP data for 22 OECD countries from 1970 to 2013 we show that when we take into account the volatility shifts the global synchronization evolution and the effect of the main determinants (trade and fi…nancial integration) differ from those obtained when we do not control for these shifts.
Also, in terms of synchronization evolution over time, we unveil that the period from 1970-2013 can be split into three sub-periods. These periods are identifi…ed either by the evolution of cross-country synchronization or by the global level of economic volatility. Furthermore, the role of the main determinants also changes between the identifi…ed periods.


JEL Classification: C33, E32.


Keywords: Business Cycles Synchronization; Time varying indexes, Volatility Shifts.

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