Globalization, The Business Cycle, And Macroeconomic Monitoring
The authors apply the framework to the G-7 countries and study various aspects of national and global business cycles, obtaining three main results. First, the measure of the global business cycle, the common G-7 real activity factor, explains a significant amount of cross-country variation and tracks the major global cyclical events of the past forty years. Second, the common G-7 factor and the idiosyncratic country factors play different roles at different times in shaping national economic activity. Finally, the degree of G-7 business cycle synchronization among country factors has changed over time.