Working Paper

Financial Openness and Business Cycle Volatility


  • Buch
  • C.M.
  • Pierdzioch
  • C.
  • Döpke
  • J.
Publication Date

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.


JEL Classification
F33, F36, F41

Key Words

  • Business cycles
  • financial markets
  • Finanzmärkte
  • Konjunkturzyklen
  • Monetary union
  • Open economy macroeconomics