New transmission mechanisms in a global economy

The increase in correlations amongst, for example, international stock markets might be a factor that increases the correlations amongst business cycles and could also speed up the international transmission of changes in business cycles. This was one of the major questions of this project. The project also investigated the importance of the behaviour private banks, the foreign investment activities of multinational enterprises and the influence of sentiment indicators on the transmission of international business cycles. These "new" transmission channels are then compared to the well known "old" transmission channels, the international linkages of interest rates and foreign trade. A major outcome was that the "new" transmission channels have some importance, particularly stock markets and sentiment indicators, but that their influence seems to be relatively low compared, for example, to the importance of foreign trade. In addition, it is still an unresolved problem, to what extent stock markets and sentiment indicators are really causal factor of the business cycle.

Selected Publications