Institutions and business cycles

This paper investigates the relationship between the main business cycles features and the institutional and structural characteristics of countries in which they are observed. We derive the business cycle characteristics of the individual countries using the nonparametric Harding-Pagan approach. Our sample is comprised of 63 countries that includes industrial, emerging and formerly centrally planned economies from all continents. We correlate these characteristics with a wide range of macroeconomic, structural and institutional factors that have been hypothesized to affect macroeconomic outcomes. In our analysis, we also examine the determinants of business cycle synchronization for the countries in our sample. In contrast to earlier studies which seek to account for such synchronization using gravity arguments as well as trade intensity and bilateral financial linkages, we also consider the proximity of their institutional and policy environments.