Why Has the U.S. Economy Become Less Correlated with the Rest of the World?
- 1 April 2003
- journal article
- Published by American Economic Association in American Economic Review
- Vol. 93 (2) , 63-69
- https://doi.org/10.1257/000282803321946813
Abstract
In this paper we do two things. First we document that over the last 40 years the U.S. business cycle has become less synchronized with the cycle in the rest of the world. Second we try to explain why this has happened. We use a general-equilibrium model as a tool to discriminate between two alternative explanations: (i) a change in the nature of real shocks, and (ii) an increase in U.S. financial integration with the rest of the world. Our results indicate that financial integration has played the major role in producing the observed changes in international co-movement.Keywords
This publication has 5 references indexed in Scilit:
- Measuring Business Cycles: Approximate Band-Pass Filters for Economic Time SeriesThe Review of Economics and Statistics, 1999
- International Risk Sharing and Low Cross-Country Consumption Correlations: Are They Really Inconsistent?Review of International Economics, 1997
- Business Cycles and the Asset Structure of Foreign TradeInternational Economic Review, 1995
- International risk-sharing and non-traded goodsJournal of International Economics, 1993
- Commodity trade and international risk sharingJournal of Monetary Economics, 1991