Juvenal, Luciana and Santos Monteiro, Paulo orcid.org/0000-0002-2014-4824 (2017) Trade and Synchronization in a Multi-Country Economy. European economic review. 385–415. ISSN 0014-2921
Abstract
Countries with strong trade linkages have more synchronized business cycles. However, the standard international business cycle framework cannot replicate this finding, uncovering the trade-comovement puzzle. Modeling trade using more sophisticated micro-level assumptions does not help resolve the puzzle. This happens because for a large class of trade models, under certain macro-level conditions, output comovement is determined by the same factor structure. We show that in such models comovement can be explained by three factors: (i) the correlation between each country's TFP; (ii) the correlation between each country's share of expenditure on domestic goods; and (iii) the correlation between each country's TFP and the partner's share of expenditure on domestic goods. An empirical investigation of the link between trade and each of the three factors shows that the trade-comovement relation is in large part explained by the second factor while in the theoretical model this factor reacts counterfactually to changes in trade costs.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy. |
Keywords: | Business Cycle Synchronization,International Trade |
Dates: |
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Institution: | The University of York |
Academic Units: | The University of York > Faculty of Social Sciences (York) > Economics and Related Studies (York) |
Depositing User: | Pure (York) |
Date Deposited: | 23 Jun 2016 12:36 |
Last Modified: | 21 Jan 2025 17:21 |
Published Version: | https://doi.org/10.1016/j.euroecorev.2016.06.005 |
Status: | Published |
Refereed: | Yes |
Identification Number: | 10.1016/j.euroecorev.2016.06.005 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:101263 |
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