|Business cycles are significantly more volatile in emerging economies than in developed ones, as has been extensively documented in the macroeconomic literature. There is also consensus that a substantial share of output volatility in emerging economies can be accounted for by domestic and idiosyncratic factors. As a result, the policy implications of these findings tend to predict that substantial welfare gains can be made from domestic policies that smooth business cycles. This paper argues the opposite view and asserts that there are no significant differences between emerging and developed economies in terms of the global and regional factors shaping macroeconomic fluctuations. Our results show that global factors account for 37%–48% of the de-trended output variance in emerging economies, substantially more than the 5%–15% range reported in the literature. By comparison, approximately half of output variance in developed economies is accounted for by global factors. We conclude that global and regional factors account for the bulk of output fluctuations in all economies, and that domestic factors are marginally more important in emerging economies than in developed ones. Therefore, cycle-smoothing domestic policies in emerging economies may not be as effective as the literature suggests.