China in the World Economy: Dynamic Correlation Analysis of Business Cycles

We analyze globalization and business cycles in China and selected OECD countries using dynamic correlation analysis. We show that dynamic correlations of business cycles of OECD countries and China are negative at business-cycle frequencies and positive for short-run developments. Furthermore, trade and financial flows of OECD countries and China reduce the degree of business cycle synchronization within the OECD area, especially at business-cycle frequencies. Thus, different degrees of participation in globalization can explain the differences between the business cycles of OECD countries.30 p