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We estimate world cycles using a new quarterly dataset of output, credit and asset prices assembled using IMF archives and covering a large set of advanced and emerging economies since 1950. World cycles, both real and financial, exist and are generally driven by US shocks. But their impact is modest for most countries. The global financial cycle is also much weaker when looking at credit rather than asset prices. We also challenge the view that syncronization has increased over time. Although this is true for prices (goods and assets), this not true for quantities (output and credit). The world business and credit cycles were as strong during Bretton Woods (1950–1972) as during the Globalization period (1984-2006). For most countries, the way their output co-moves with the rest of the world has changed little over the last 70 years. We discuss the reasons behind these new findings and their policy implications for small open economies.

Business cycles. --- Economic cycles --- Economic fluctuations --- Cycles --- Finance: General --- Investments: Bonds --- Macroeconomics --- Money and Monetary Policy --- Business Fluctuations --- Open Economy Macroeconomics --- International Policy Coordination and Transmission --- Price Level --- Inflation --- Deflation --- General Financial Markets: General (includes Measurement and Data) --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Financial Crises --- Monetary economics --- Investment & securities --- Finance --- Economic & financial crises & disasters --- Asset prices --- Credit --- Bond yields --- Financial integration --- Global financial crisis of 2008-2009 --- Prices --- Money --- Financial institutions --- Financial markets --- Financial crises --- Bonds --- International finance --- Global Financial Crisis, 2008-2009 --- United States

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This paper assesses the strength of business cycle synchronization between 1950 and 2014 in a sample of 21 countries using a new quarterly dataset based on IMF archival data. Contrary to the common wisdom, we find that the globalization period is not associated with more output synchronization at the global level. The world business cycle was as strong during Bretton Woods (1950-1971) than during the Globalization period (1984-2006). Although globalization did not affect the average level of co-movement, trade and financial integration strongly affect the way countries co-move with the rest of the world. We find that financial integration de-synchronizes national outputs from the world cycle, although the magnitude of this effect depends crucially on the type of shocks hitting the world economy. This de-synchronizing effect has offset the synchronizing impact of other forces, such as increased trade integration.

Business cycles. --- Globalization. --- Commerce. --- Trade --- Economics --- Business --- Transportation --- Global cities --- Globalisation --- Internationalization --- International relations --- Anti-globalization movement --- Economic cycles --- Economic fluctuations --- Cycles --- Traffic (Commerce) --- Merchants --- Exports and Imports --- Finance: General --- Foreign Exchange --- Macroeconomics --- Globalization --- Business Fluctuations --- Open Economy Macroeconomics --- International Policy Coordination and Transmission --- General Financial Markets: General (includes Measurement and Data) --- Financial Aspects of Economic Integration --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Globalization: General --- Finance --- International economics --- Economic growth --- Currency --- Foreign exchange --- Financial integration --- Trade integration --- Business cycles --- Exchange rate arrangements --- Financial markets --- Economic integration --- International finance --- International economic integration --- United States

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Do Old Habits Die Hard? Central Banks and the Bretton Woods Gold Puzzle.

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This paper highlights how changes in the composition of demand affect income dispersion in the short run. We first document how the share of aggregate spending dedicated to labour-intensive goods and services shrinks (expands) during downturns (booms), and argue that this contributes to the observed pro-cyclicality of employment and output in labour-intensive industries. Using a two-sector general equilibrium model, we then assess how this demand composition channel influences the cyclical properties of the income distribution. Consistent with empirical evidence, we find income inequality to be countercyclical due to changes in the level of employment and (to a lesser extent) relative factor prices. The model also shows that wealth redistribution policies can potentially involve a trade-off between equality and output, depending on how they affect the composition of aggregate demand.

Demand (Economic theory) --- Income distribution --- Economic policy --- Supply and demand --- Production (Economic theory) --- Econometric models. --- Labor --- Macroeconomics --- Personal Income, Wealth, and Their Distributions --- Factor Income Distribution --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Wage Level and Structure --- Wage Differentials --- Aggregate Factor Income Distribution --- Labor Economics: General --- Labour --- income economics --- Income inequality --- Income --- National accounts --- Labor economics --- Economic theory --- United States

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We test whether foreign demand matters for local house prices in the US using an identification strategy based on the existence of “home bias abroad” in international real estate markets. Following an extreme political crisis event abroad, a proxy for a strong and exogenous shift in foreign demand, we show that house prices rise disproportionately more in neighbourhoods with a high concentration of population originating from the crisis country. This effect is strong, persistent, and robust to the exclusion of major cities. We also show that areas that were already expensive in the late 1990s have experienced the strongest foreign demand shocks and the biggest drop in affordability between 2000 and 2017. Our findings suggest a non-trivial causal effect of foreign demand shocks on local house prices over the last 20 years, especially in neighbourhoods that were already rather unaffordable for the median household.

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