This paper shows correlations in GDP fluctuations rise with financial integration. Finance serves to increase international correlations in both consumption and GDP fluctuations, which explains the persistent gap between the two in the data, a quantity puzzle. The positive association between...

Fluctuations in GDP are more synchronized internationally than fluctuations in Consumption, and they remain so even between financially integrated economies, where the ranking should in theory be the reverse. This paper shows this happens because correlations in GDP fluctuations rise with...