Synchronisation of Cycles: a Demand Side Perspective

The paper addresses the issue of synchronisation of economic cycles. While the literature has focused on the supply side, we present evidence from a demand side perspective. Using different measures of correlation both in the time and the frequency domain, we find evidence of a high degree of co-movement between GDP national business cycles. Studying the cyclical properties of demand aggregates, we find similar high values of synchronisation only for import and more recently for export variables. Investment series show intermediate values of correlation while consumption cycles are considerably less synchronised. Estimation of unobserved factor models supports these findings. Furthermore, GDP cycles seem to have become more synchronised over time, reflecting a general increase of correlation coefficients among demand components; the uncertainty surrounding point estimates indicates however that results should be taken only as preliminary.