G7 Countries – Advocates of the Global Business Cycle

In the new global framework, the concept of business cycle synchronization has become a central research issue, in order to better explain the interdependencies, co-movements and exceptional behaviors among the national economies. The aim of this research paper is to assess business cycles’ synchronization within the G7, emphasizing the role of the trade channel as a transmission vector. Annual growth rates for GDP and trade were filtered using the Hodrick-Prescott method and the results were correlated through the Pearson approach to obtain the degree of similarity between countries with respect to their economic fluctuations. The results highlight a stronger degree of synchronization during recessions, while in time of economic expansion there are 2 well-defined macro cycles corresponding to each continent: Europe, North America and the emergent Asian cycle. Furthermore, trade was proven to be an important business cycle vector just for some countries, while for the completeness of the study additional variables should be also taken into consideration.The significance of this study resides in the highlighting of the business cycle synchronization by means of the trade channel for the most influential economic powers of the world. This work can be transformed into a cybernetic model of the business cycle and, most of all it can offer solutions regarding the propagation of the crisis.