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Synchronisation in business cycles: An endogenous explanation

De Grauwe, Paul, Ji, Yuemei, (2016), “Synchronisation in business cycles: An endogenous explanation”, Voxeu, 7 June

There is a high degree of correlation between the business cycles of different countries. This is particularly the case in the Eurozone, but also among industrialised countries outside of the Eurozone. Using a two-country behavioural macroeconomic model, this column shows that the main channel for the synchronisation of business cycles is the propagation of ‘animal spirits’ – waves of optimism and pessimism that become correlated internationally.

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