ABSTRACT
The dramatic global economic downturn that accompanied the global economic crisis of 2007–9 has been emphatically ascribed to the strong growth of openness in trade and finance and was facilitated by the significant improvements in transportation and communication in past decades. The impression has been that globalization is an unavoidable force that makes sovereign nations and countries become increasingly ‘borderless’, or operate in sync as a single global market. This can lead countries to be tied together in various phases of the economic cycles over time. It is not difficult for one to think that greater trade and financial linkages would lead to tighter business cycles, instead of their being divergent or asynchronous. A perfunctory inspection of the data would indeed suggest so (Lane and Milesi-Ferretti, 2004, 2007).
