Measuring the dynamics of global business cycle connectedness

Abstract Using a connectedness measurement technology fundamentally grounded in modern network theory, the chapter measures real output connectedness for a set of six developed countries, from 1962 to 2010. It shows that global connectedness is sizable and time-varying over the business cycle, and it studies the nature of the time variation relative to the ongoing discussion about the changing nature of the global business cycle. It also shows that connectedness corresponding to transmissions to others from the United States and Japan is disproportionately important. The data used in this analysis is quite different to earlier works; industrial production indexes at monthly intervals allows the connectedness of business cycle shocks to be captured much faster.