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This paper examines the size and source of external spillovers to Australia and New Zealand based on a structural vector autoregression (VAR) approach. It finds that during the last decade shocks from emerging Asia have become more important than those from the United States in affecting Australia’s business cycle. A 1 percent shock to emerging Asia’s growth is found to shift Australian growth by about 1/3 percent. Furthermore, there is evidence that commodity prices dominate the transmission of shocks from emerging Asia to Australia. The influence of emerging Asia on New Zealand is found to come indirectly through Australia, with Australian shocks transmitting almost "one-on-one" to New Zealand, largely through financial factors.

Business cycles --- Finance --- Economic cycles --- Economic fluctuations --- Cycles --- Econometrics --- Macroeconomics --- Business Fluctuations --- Economic Integration --- International Policy Coordination and Transmission --- Externalities --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Commodity Markets --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Price Level --- Inflation --- Deflation --- Econometrics & economic statistics --- Economic growth --- Spillovers --- Vector autoregression --- Commodity prices --- Commodity price indexes --- Financial sector policy and analysis --- Econometric analysis --- Prices --- International finance --- Price indexes --- New Zealand

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One side-effect of the Global Financial Crisis of 2008-09 was the resurgence of a debate over exchange rates. The conventional wisdom dictates that real-exchange rate adjustments are needed in order to bring about changes in trade balances across countries. However, the literature on the effect of exchange rate fluctuations and currency under-valuations on exports is surprisingly ambiguous. This note explores for the first time the potential role of foreign direct investment as an intermediate variable in the process of trade adjustment after large real-exchange rate changes. Real-exchange rate devaluations might result in increases in foreign direct investment inflows, as investors can take advantage of changes in the foreign-currency value of domestic assets. If so, the response of exports will depend to some extent on the nature of such foreign direct investment inflows, with inflows motivated by "horizontal" foreign direct investment associated with negligible changes in export growth after devaluation. The author utilizes quarterly data on real effective exchange rates, foreign direct investment inflows and exports to explore the effects of large devaluations (defined as the largest observed quarterly real effective exchange rate devaluation) on foreign direct investment and exports from 1990 to 2010. The admittedly speculative evidence suggests that there were heterogeneous experiences regarding the timing and magnitude of subsequent changes in foreign direct investment and exports, but on average foreign direct investment inflows tended to precede export surges within two year horizons.

Currencies and Exchange Rates --- Debt Markets --- Devaluations --- Economic Theory & Research --- Emerging Markets --- Exchange Rate Fluctuations --- Exports --- Foreign Direct Investment --- Global Financial Crisis --- International Economics & Trade

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This paper analyzes the duration of house price upturns and downturns in the last 40 years for 19 OECD countries. I provide two sets of results, one pertaining to the average length and the other to the length distribution. On average, upturns are longer than downturns, but the difference disappears once the last house price boom is excluded. In terms of length distribution, upturns (but not downturns) are more likely to end as their duration increases. This duration dependence is consistent with a boom-bust view of house price dynamics, where booms represent departures from fundamentals that are increasingly difficult to sustain.

Inflation --- Infrastructure --- Macroeconomics --- Real Estate --- Duration Analysis --- Business Fluctuations --- Cycles --- Housing Supply and Markets --- Economic Development: Urban, Rural, Regional, and Transportation Analysis --- Housing --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Price Level --- Deflation --- Property & real estate --- Economic growth --- Housing prices --- Business cycles --- Prices --- National accounts --- Saving and investment --- United States

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This paper examines how durable goods and financial frictions shape the business cycle of a small open economy subject to shocks to trend and transitory shocks. In the data, nondurable consumption is not as volatile as income for both developed and emerging market economies. The simulation of the model implies that shocks to trend play a less important role than previously documented. Financial frictions improve the ability of the model to match some key business cycle properties of emerging economies. A countercyclical borrowing premium interacts with the nature of durable goods delivering highly volatile consumption and very countercyclical net exports.

Business cycles --- Consumer goods --- Consumer products --- Consumers' goods --- Goods, Consumer --- Commercial products --- Economic cycles --- Economic fluctuations --- Cycles --- Econometric models. --- Finance: General --- Macroeconomics --- Economic Theory --- Business Fluctuations --- Open Economy Macroeconomics --- Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation --- Macroeconomics: Consumption --- Saving --- Wealth --- Financial Economics --- General Financial Markets: General (includes Measurement and Data) --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Aggregate Factor Income Distribution --- Economic theory & philosophy --- Finance --- Economic growth --- Consumption --- Financial frictions --- Emerging and frontier financial markets --- Income --- National accounts --- Economic theory --- Financial markets --- Economics --- Economic forecasting --- Financial services industry --- Taiwan Province of China

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This study proposes a data-based algorithm to select a subset of indicators from a large data set with a focus on forecasting recessions. The algorithm selects leading indicators of recessions based on the forecast encompassing principle and combines the forecasts. An application to U.S. data shows that forecasts obtained from the algorithm are consistently among the best in a large comparative forecasting exercise at various forecasting horizons. In addition, the selected indicators are reasonable and consistent with the standard leading indicators followed by many observers of business cycles. The suggested algorithm has several advantages, including wide applicability and objective variable selection.

Economic forecasting --- Financial crises --- Crashes, Financial --- Crises, Financial --- Financial crashes --- Financial panics --- Panics (Finance) --- Stock exchange crashes --- Stock market panics --- Crises --- Econometric models. --- Infrastructure --- Labor --- Macroeconomics --- Production and Operations Management --- Multiple or Simultaneous Equation Models --- Multiple Variables: General --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- State Space Models --- Model Evaluation and Selection --- Forecasting and Other Model Applications --- Business Fluctuations --- Cycles --- Prices, Business Fluctuations, and Cycles: Forecasting and Simulation --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Economic Development: Urban, Rural, Regional, and Transportation Analysis --- Housing --- Demand and Supply of Labor: General --- Macroeconomics: Production --- Economic growth --- Labour --- income economics --- Cyclical indicators --- Business cycles --- Labor markets --- Capacity utilization --- National accounts --- Production --- Saving and investment --- Labor market --- Industrial capacity --- United States