World Business Cycles under Fixed and Flexible Exchange Rates.

This article examines the interrelationships between innovations in monthly industrial production indices in a set of economies during the time period 1963 to 1986, using spectral analysis as the research methodology because it facilitates the study of a world business cycle. This empirical study of multi-country output movements under fixed and flexible exchange is chosen because industrial production indices are subject to stochastic growth. The variances of the monthly growth rates are higher in the flexible exchange rate period than in the fixed exchange rate period, and output movements have been correlated across countries under both exchange rate regimes, producing evidence of a world business cycle.