Abstract How do international business cycles change as countries mature and become
more deeply linked with their partners? This paper answers that question by establishing new
stylized facts on the systematic variation in the transmission of shocks within and between
countries along low-frequency trends in income, industrial structure, openness, and trade and
nancial linkages. Namely, this paper estimates a global VAR where the coecients in the
autoregressive matrix vary as linear functions of these low-frequency trends. Preliminary
results indicate that when a country exports more investment goods to a given partner
country or holds more portfolio equity assets in a given partner country, the response of
its output to shocks from its partner is amplied. However, when a counter imports more
intermediate goods from a given partner country or holds more FDI assets in a given partner
country, the response of its output to shocks from its partner is dampened. Furthermore,
the amplication eects from a given increase in bilateral asset holdings are smaller than
the amplication eects from the same increase in bilateral trade, but since bilateral asset
holdings have grown to a greater extent than trade volumes have in the past few decades,
the average change in transmission over the past few decades can be better attributed to the
growth in bilateral asset holdings. Taking a broader view, the reduced-form approach in this
paper is a way of arriving at stylized facts that can inform future structural international
macro models
exible enough to account for a world where income, industrial structure and
global linkages continue to change rapidly across countries worldwide.
Keywords: International Business Cycles, Global Panel VAR, Financial Integration,
Stylized Facts.