Next we examine the relative macroeconomic performance across our sample. As discussed, we extract the first principal component of real GDP growth, which explains 39% of the total variation in growth rates across our sample of 46 economies. Figure 2 graphs the first principal component of global GDP growth, normalised to have a mean of zero and a standard deviation of one. The figure shows the magnitude and timing of the global business cycle from 1998 to 2010. We find that, following the bursting of the dotcom bubble in 2000– 01, the global business cycle fell to approximately half of one.
