This paper investigates the dynamic interrelationships of economic act
ivity in major economies under the pre- and post-Bretton Woods eras of
fixed and flexible exchange rates. A recently developed multivariate
method called common trends and common cycles is used to detect the pr
esence of both short- and long-term comovements in monthly industrial
production indices of the G7 countries during the period from 1963 to
1993. The empirical results indicate the existence of an international
business cycle under both regimes. Further, we show that the comoveme
nts in levels and in growth rates of the series have been more importa
nt in the pre-1973 period of fixed rates.