Kiel Working Papers, Kiel Institute for World Economics
No 1121:
Financial Openness and Business Cycle Volatility
Claudia M. Buch, Jörg Döpke and Christian Pierdzioch
Abstract: This paper discusses whether the integration of
international financial markets affects business cycle fluctuations. In the
framework of a new open economy macro-model, we show that the link between
financial openness and business cycle volatility depends on the nature of
the underlying shock. Empirical evidence supports this conclusion. Our
results also show that the link between business cycle volatility and
financial openness has not been stable over time.
Keywords: Open Economy Macroeconomics; Monetary union; Business cycles; Financial markets; (follow links to similar papers)
JEL-Codes: F33; F36; F41; (follow links to similar papers)
37 pages, July 2002
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