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Non-Technical SummaryThe study analyses business cycles of the G7 countries in a structural vector autoregression (SVAR) framework with common factors. A multitude of studies which investigate the driving forces of international business cycles distinguish between common and country-specific shocks, while the identified shocks are not given an economic interpretation.The main advantage of our approach vis-à-vis other empirical approaches is that we consider three types of structural shocks -supply, demand and nominal-that contain (unobserved) common and country-specific elements. Such a modelling approach is in line with a class of theoretical international business cycle models that trace international linkages back to common exogenous shocks.We first establish that output cycles of the G7 countries have generally been highly correlated, but a recent increase in the cycle synchronisation is not observed. Nominal interest rate growth is found to be moderately correlated in the G7 group, and since the mid-1990s a gradual increase in synchronisation took place. Inflation growth, however, has always been a rather country-specific phenomenon according to our findings.In order to assess the similarity of the shock propagation mechanisms in the G7 countries, we compute correlations that would have been observed if the countries were subject to common shocks only. We find that we would generally observe much higher correlations of the cyclical measures if only common shocks occurred or if common shocks had a larger share in the variance of the cycles. Japan is an exception to this rule.Common supply shocks are the only important contributor to output fluctuations within the class of common shocks and the main driving force of synchronisation. Country-specific nominal shocks contribute to the output cycle variance only in Canada, Italy and the US, and country-specific demand shocks only in the US. The weights of nominal and demand shocks are negligible for all other G7 countries. The G7 countries do not differ much in terms of shock propagation with respect to inflation growth, but they are subject to large asymmetric shocks. This explains the low correlations of inflation growth in the G7 group.The total share of common shocks is generally relatively high in the G7 countries' nominal interest rate growth, which explains the strong correlation among the G7 countries' nomin...