International business cycle synchronization since the 1870s: Evidence from a novel network approach

• Examine business cycle synchronization in 27 developed and developing countries between 1875 and 2013.
• Employ a novel network approach, the Threshold-Minimum Dominating Set that uses tools from graph theory.
• Results reveal heterogeneous patterns of business cycle synchronization during various globalization periods since the 1870s.

In this study, we examine the issue of business cycle synchronization from a historical perspective in 27 developed and developing countries. Based on a novel complex network approach, the Threshold-Minimum Dominating Set (T-MDS), our results reveal heterogeneous patterns of international business cycle synchronization during fundamental globalization periods since the 1870s. In particular, the proposed methodology reveals that worldwide business cycles de-coupled during the Gold Standard, though they were synchronized during the Great Depression. The Bretton Woods era was associated with a lower degree of synchronization as compared to that during the Great Depression, while worldwide business cycle synchronization increased to unprecedented levels during the latest period of floating exchange rates and the Great Recession.