publication . Preprint . 2009

Should we expect financial globalization to have significant effects on business cycles?

Iversen, Jens;
Open Access
  • Published: 01 Oct 2009
Abstract
Empirical research suggests that financial globalization has insignificant effects on business cycles. Based on standard theoretical models it might be conjectured that the effects should be significant. I show that this conjecture is wrong. Theoretical effects of financial globalization can be determined to any level of precision by expanding the underlying artificial samples. In contrast, in the data the effects are imprecisely estimated because of short samples. I show that if the conclusion is based on empirically relevant sample sizes, a benchmark international real business cycle model predicts insignificant effects of financial integration for all busines...
Subjects
free text keywords: Financial Globalization; Business Cycles; Monte Carlo Methods, jel:C15, jel:E44, jel:G15
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