Working Paper

Financial Openness and Business Cycle Volatility

Kiel Working Papers, 1121

This paper discusses whether the integration of international financial markets affects business cycle fluctuations. In the framework of a new open economy macro-model, we show that the link between financial openness and business cycle volatility depends on the nature of the underlying shock. Empirical evidence supports this conclusion. Our results also show that the link between business cycle volatility and financial openness has not been stable over time.


Claudia M. Buch
Christian Pierdzioch
Jörg Döpke


Publication Date
JEL Classification
F33, F36, F41