This paper reexamines the question of how to explain business cycle co-movements within and between countries. First, we present two simple theoretically flexible price models to illustrate how and why news shocks can generate robust positive co-movements in economic activity across countries. We also discuss under what conditions the multi-sector version of the model generates appropriate business cycle patterns within countries. Second, we develop a quantitative two-country multi-sector model that is capable of replicating many international business cycle facts. The model is a two-country extension of the closed economy model of Beaudry and Portier , in which there are limited possibilities to reallocate factors between investment and consumption good sectors.
business cycles; expectations; international fluctuations;
- E32: Business Fluctuations • Cycles
- F41: Open Economy Macroeconomics
Paul Beaudry, Martial Dupaigne et Franck Portier, « Modeling News-Driven International Business Cycles », TSE Working Paper, n° 09-117, novembre 2009.
TSE Working Paper, n° 09-117, novembre 2009