If the Unites States sneezes, does the world need paracetamol?

Maria Jesus Herrerias () and Javier Ordóñez

No 2011/03, Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain)

Abstract: There is an old saying that states that “If the United States sneezes, the rest of the world catches a cold”. Against this background, it is argued that some countries, especifically China, can “decouple” from the US economy and sustain strong growth in the face of a US slowdown. In this paper we analyze the extent to which the US economy affects international business fluctuations across countries. A multivariate nonlinear LSTAR model is estimated for the GDP cyclical component of China, France, Germany, the UK and the USA. This nonlinear framework allows the business cycles asymmetries to be captured properly in order to identify the synchronization behavior across countries. Our results suggest that there is a relevant influence from the US cycle, since it acts as a source of international business cycle synchronization. However, spillovers from US cycle fluctuations to China are rather modest.

Keywords: Business Cycle; nonlinearities; synchronization; decoupling (search for similar items in EconPapers)
JEL-codes: C32 E32 F15 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:jau:wpaper:2011/03

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