The Impact Of International Trade And Financial Integration On Merging Of Business Cycles Across Countries

1518 Words Oct 20th, 2015 7 Pages
What is the sole impact of these recent developments on merging of business cycles across countries?
The answer to this question has been thoroughly plotted as an attempt to solve the globalization puzzle. A systematic examination has been done as though how the impact of international trade and financial integration has greatly influenced the international cycle of business comovements. To be specific, an analysis of patterns of precise correlations was made for industrial and developing countries that inspired a unique empirical framework. Different aspects of globalization that affect output as well as stock returns between two countries have been thoroughly examined.
• If we study the usual aspects of the Economic theory, it would be difficult for us to understand the impacts of increased trade and financial integration on the flow of synched business cycles. For instance, it is true that international trade linkages generate both demand and supply outages across countries. Say on the demand side, a boom in consumption rates of one country can result in an increased demand for imports, hence improving economies at home and abroad. Through such types of spillovers, significant trading relations can be established and result in highly correlated business cycles across respective countries.
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