Robert Inklaar

Trade and Business Cycle Synchronization in OECD Countries. A Re-Examination

This paper re-examines the relationship between trade intensity and business cycle synchronization for 21 OECD countries in the period 1970–2003. Instead of using instrumental variables, we estimate a multivariate model including variables capturing specialization and similarity of economic policies. We confirm that trade intensity affects synchronization, but the effect is much smaller than previously reported. Other factors, like specialization and convergence in monetary and fiscal policies, have a similar impact on business cycle synchronization as trade intensity.

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