Essays on measuring international and intranational business cycles

The following studies aim to measure the relative importance of permanent and transitory components of the US business cycles and of the international business cycles of the G7 countries.; Study I. The relative importance of permanent and transitory components of macroeconomic time series. The study presents a decomposition of macroeconomic time series such as real GDP, industrial production, consumption, investment, and personal income into permanent and transitory components using highly popular approaches in the recent literature such as the unobserved components model, the Hodrick-Prescott filter, and the Baxter-King filter. It is shown that the weights that these approaches assign to the permanent and transitory shocks in aggregate economic fluctuations are different.; Study II. The dynamics of permanent and transitory components in international business cycles. The study investigates the dynamics of permanent and transitory components that are common across seven developed nations of the world. The common components are modeled to exhibit different behavior in the expansion and recession phases of international business cycles. I employ a multivariate unobserved components model with Markov regime switching. I find that the international business cycle does not exhibit classical contraction and expansion phases. The international permanent component has two phases: a high-growth phase and a low-growth phase, and there is no evidence of an international transitory component. The switch from a high-growth regime to a low-growth regime occurs in the second quarter of 1973. There are no further switches that occur from one regime to another. I also find that Japan is the most sensitive and Germany is the least sensitive to international permanent shocks.; Study III. Driving forces behind international business cycle fluctuations: Can one identify them? The study applies cointegrated VAR methodology to identify the long run structure of driving forces behind the international business cycles of the G7 countries. The study shows that the seven countries share four stochastic trends, where the single pushing force of one of the trends is the US. At the same time, the US is not influenced by permanent shocks of the other countries. Shocks to the US are the only ones that have a permanent effect on the France and the UK. The remaining three trends originate as collective stochastic shocks to Canada, France, Germany and Japan. The UK has a transitory effect on the other countries.