Dancing in Unison? Economist lack evidence of increasing synchronization of the world's economies

Globalization is increasing the links between the world's economies, particularly through capital markets and trade flows. Does the growing importance of these links mean that international policy coordination is now a necessity for effective policy-making? How sensible is it, in an increasingly global economy, to make policy decisions largely at the national level? These questions came to the fore when, after a decade of economic expansion, growth slowed simultaneously in early 2000 in the advanced economies known as the Group of Seven (G-7)-Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. Researchers looking into this complex issue make a distinction between financial market synchronization and synchronization of what they term the "real" economy, such as the output of goods and services as measured by GDP. What they have found is that, although the increase in financial market comovement is relatively clear and consistent, evidence of increased comovement of the real economy is blurred and controversial. While stock prices in the advanced economies may move in parallel much of the time, the degree of synchronization of the real economy is substantially lower.