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Can The Standard International Business Cycle Model Explain The Relation Between Trade And Comovement
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Book Synopsis Can the Standard International Business Cycle Model Explain the Relation Between Trade and Comovement? by : M. Ayhan Kose
Download or read book Can the Standard International Business Cycle Model Explain the Relation Between Trade and Comovement? written by M. Ayhan Kose and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent empirical research finds that pairs of countries with stronger trade linkages tend to have more highly correlated business cycles. The authors assess whether the standard international business cycle framework can replicate this intuitive result. They employ a three-country model with transportation costs, and they simulate the effects of increased goods market integration under two asset market structures: complete markets and international financial autarky. The main finding is that under both asset market structures the model can generate stronger correlations for pairs of countries that trade more, but the increased correlation falls far short of the empirical findings. Even when the authors control for the fact that most country pairs are small with respect to the rest of the world, the model continues to fall short. They also conduct additional simulations that allow for increased trade with the third country or increased TFP shock comovement to affect the country pair's business cycle comovement. These simulations are helpful in highlighting channels that could narrow the gap between the empirical findings and the predictions of the model.
Book Synopsis Can the Standard International Business Cycle Model Explain the Realtionship Between Trade and Comovement? by : M. Ayhan Kose
Download or read book Can the Standard International Business Cycle Model Explain the Realtionship Between Trade and Comovement? written by M. Ayhan Kose and published by . This book was released on 2005 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis How Does Globalization Affect the Synchronization of Business Cycles? by : M. Ayhan Kose
Download or read book How Does Globalization Affect the Synchronization of Business Cycles? written by M. Ayhan Kose and published by International Monetary Fund. This book was released on 2003-03-04 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the impact of rising trade and financial integration on international business cycle comovement among a large group of industrial and developing countries. The results provide at best limited support for the conventional wisdom that globalization has increased the degree of synchronization of business cycles. The evidence that trade and financial integration enhance global spillovers of macroeconomic fluctuations is stronger for industrial countries. One striking result is that, on average, cross-country consumption correlations have not increased in the 1990s, precisely when financial integration would have been expected to result in better risk-sharing opportunities, especially for developing countries.
Book Synopsis International Trade and Business Cycles by : Marianne Baxter
Download or read book International Trade and Business Cycles written by Marianne Baxter and published by . This book was released on 1995 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt: Virtually all economies experience recurrent fluctuations in economic activity that persist for periods of several quarters to several years. Further, there is a definite tendency for the business cycles of developed countries to move together--there is a world component to business cycles. This paper argues that capital accumulation and international capital flows are central to understanding world trade and business cycles. In particular, fluctuations in net exports and the current account are shown to be dominated by trade in capital goods. The paper develops a two country model of international trade within which capital accumulation and international investment flows play a central role. We explore the channels by which technology shocks and fiscal shocks are transmitted to the domestic and foreign economies, and discuss the extent to which these results are sensitive to individuals' opportunities for international trade in financial assets. Overall, we find that the models capture many of the salient features of international business cycles. However, it has proven consistently difficult to generate sufficient comovement across countries in labor input and investment. The paper concludes with a discussion of fruitful directions for future research.
Book Synopsis Trade Linkages and International Business Cycle Comovement: Evidence from Korean Industry Data by : Dongyeol Lee
Download or read book Trade Linkages and International Business Cycle Comovement: Evidence from Korean Industry Data written by Dongyeol Lee and published by International Monetary Fund. This book was released on 2019-05-24 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Through the 2000s, Korea’s export and import linkages to advanced and emerging markets increased significantly. At the same time, the correlation of output growth between Korea and these economies rose. This paper investigates the nature of the link between trade linkages and the comovement of international business cycles (BC) using Korean industry-level domestic and international input-output data. The results suggest that, at the industry-level, higher export linkages lead to a larger positive GDP growth comovement, while higher import linkages lead to higher negative employment growth comovement. Furthermore, the decomposition of aggregate BC comovement shows that the increase in trade with China has contributed the most to aggregate BC comovement, while the impact of trade linkages on BC comovement is propagated domestically via vertical linkages. These findings suggest that the Korean economy can be significantly affected by a few countries that are highly linked through trade to Korea and/or a few industries that are highly interconnected to other industries.
Book Synopsis Technology Shocks and Aggregate Fluctuations by : Mr.Pau Rabanal
Download or read book Technology Shocks and Aggregate Fluctuations written by Mr.Pau Rabanal and published by International Monetary Fund. This book was released on 2004-12-01 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: Our answer: Not so well. We reached that conclusion after reviewing recent research on the role of technology as a source of economic fluctuations. The bulk of the evidence suggests a limited role for aggregate technology shocks, pointing instead to demand factors as the main force behind the strong positive comovement between output and labor input measures.
Book Synopsis Determinants of Business Cycle Comovement by : Marianne Baxter
Download or read book Determinants of Business Cycle Comovement written by Marianne Baxter and published by . This book was released on 2004 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This paper investigates the determinants of business cycle comovement between countries. Our dataset includes over 100 countries, both developed and developing. We search for variables that are robust' in explaining comovement, using the approach of Leamer (1983). Variables considered are (i) bilateral trade between countries; (ii) total trade in each country; (iii) sectoral structure; (iv) similarity in export and import baskets; (v) factor endowments; and (vi) gravity variables. We find that bilateral trade is robust. However, two variables that the literature has argued are important for business cycles industrial structure and currency unions are found not to be robust"--NBER website
Book Synopsis Global Business Cycles by : Mr.Ayhan Kose
Download or read book Global Business Cycles written by Mr.Ayhan Kose and published by International Monetary Fund. This book was released on 2008-06-01 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the evolution of the degree of global cyclical interdependence over the period 1960-2005. We categorize the 106 countries in our sample into three groups-industrial countries, emerging markets, and other developing economies. Using a dynamic factor model, we then decompose macroeconomic fluctuations in key macroeconomic aggregates-output, consumption, and investment-into different factors. These are: (i) a global factor, which picks up fluctuations that are common across all variables and countries; (ii) three group-specific factors, which capture fluctuations that are common to all variables and all countries within each group of countries; (iii) country factors, which are common across all aggregates in a given country; and (iv) idiosyncratic factors specific to each time series. Our main result is that, during the period of globalization (1985-2005), there has been some convergence of business cycle fluctuations among the group of industrial economies and among the group of emerging market economies. Surprisingly, there has been a concomitant decline in the relative importance of the global factor. In other words, there is evidence of business cycle convergence within each of these two groups of countries but divergence (or decoupling) between them.
Book Synopsis Tastes and Technology in a Two-country Model of the Business Cycle by : Alan C. Stockman
Download or read book Tastes and Technology in a Two-country Model of the Business Cycle written by Alan C. Stockman and published by . This book was released on 1990 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the international transmission of business cycles by developing a two-country real business-cycle model and confronting it with a broad set of empirical observations. These observations include variances and covariances of output, labor, consumption, employment, and investment in traded and nontraded sectors of the economy, cross-country correlations of output and consumption, and correlations between quantities and relative prices. We find that technology shocks as measured by observed total factor productivity (by sector) must be supplemented by other sources of disturbances to explain certain features of the data. We call these other disturbances taste shocks, though they may stand in for some other shocks. In particular, it is difficult to explain the observed comovements of the relative price of nontraded to traded goods with the relative consumption of those goods without invoking something like taste shocks. Our model is roughly consistent with a broad set of observations, though puzzles emerge regarding the correlation of nontraded-sector output with its relative price and the variance of the balance of trade.
Book Synopsis Putting the Parts Together: Trade, Vertical Linkages, and Business Cycle Comovement by : Andrei A. Levchenko
Download or read book Putting the Parts Together: Trade, Vertical Linkages, and Business Cycle Comovement written by Andrei A. Levchenko and published by INTERNATIONAL MONETARY FUND. This book was released on 2009-08-01 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: Countries that trade more with each other exhibit higher business cycle correlation. This paper examines the mechanisms underlying this relationship using a large cross-country industry-level panel dataset of manufacturing production and trade. We show that sector pairs that experience more bilateral trade exhibit stronger comovement. Vertical linkages in production are an important explanation behind this effect: bilateral international trade increases comovement significantly more in cross-border industry pairs that use each other as intermediate inputs. Our estimates imply that these vertical production linkages account for some 30% of the total impact of bilateral trade on the business cycle correlation.
Book Synopsis When and How to Adjust Beyond the Business Cycle? A Guide to Structural Fiscal Balances by : Fabian Bornhorst
Download or read book When and How to Adjust Beyond the Business Cycle? A Guide to Structural Fiscal Balances written by Fabian Bornhorst and published by International Monetary Fund. This book was released on 2011-04-11 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Technical Notes and Manuals are produced by IMF departments to expand the dissemination of their technical assistance advice. These papers present general advice and guidance, drawn in part from unpublished technical assistance reports, to a broader audience. This new series was launched in August 2009.
Book Synopsis Frontiers of Business Cycle Research by : Thomas F. Cooley
Download or read book Frontiers of Business Cycle Research written by Thomas F. Cooley and published by Princeton University Press. This book was released on 1995-02-26 with total page 452 pages. Available in PDF, EPUB and Kindle. Book excerpt: This introduction to modern business cycle theory uses a neoclassical growth framework to study the economic fluctuations associated with the business cycle. Presenting advances in dynamic economic theory and computational methods, it applies concepts to t
Book Synopsis Essays on International Trade and Business Cycles by : Daisoon Kim
Download or read book Essays on International Trade and Business Cycles written by Daisoon Kim and published by . This book was released on 2019 with total page 149 pages. Available in PDF, EPUB and Kindle. Book excerpt: This research investigates how international trade and business cycles vary with characteristics of industries. The first chapter documents cost side industry heterogeneity across narrowly defined industries. The second and third chapters study the short run (international business cycle) and long run (home market effect) phenomenon, respectively. The research contributes to a better understanding of how the supply side industry heterogeneity plays a vital role in international trade and macroeconomics. The first chapter provides a method to estimate the cost structure. The approach relies on cost minimization and free entry condition with frictions, which allows decomposing sources of economies of scale into a sloping marginal cost curve and fixed cost. The US manufacturing industry data show that industry-level economies of scale are more strongly associated with marginal costs than fixed costs. The second chapter shows that the industry's international business cycle patterns vary systemically by the slopes. In industries with decreasing marginal costs, output, imports, and exports are all more correlated with aggregate GDP than in industries with increasing marginal costs. To rationalize the observed patterns, this chapter introduces sloping marginal cost curves and their variations across industries in an open economy macroeconomic model. It delivers endogenous export gains/losses and within-firm links between domestic and export markets which generate two attractive features of the model: (i) it raises model-implied cross-country aggregate GDP comovements which are close to the data, and (ii) it reproduces observed industrial international business cycle patterns. The results suggest that sloping marginal cost curves and their heterogeneity are informative to understand the international business cycle. The third chapter studies how industry characteristics determine the home market effect: the impact of country size on trade surplus and the location of industries. This chapter constructs a two-country multi-industry new trade model that allows for various supply- and demand-side industry characteristics. A novel feature of the model is that economies of scale arise not just from fixed costs, but also from sloping marginal cost curves. The model predicts that large countries have a higher concentration of industries in which (i) marginal costs are an important source of economies of scale, and (ii) products are more differentiated. This chapter tests these theoretical predictions using a gravity-based specification and introduces instrumental variables to fix measurement error and proxy problems. The empirical results are consistent with the main predictions of the model. The results show that the primary building blocks of new trade theory, economies of scale and product differentiation, are central to understanding international trade patterns in narrowly defined industries. The research supposes that a non-linear cost function and variations in cost structure across industries improve our understanding of international trade and business cycles.
Book Synopsis Trade Integration and Business Cycle Synchronization by : Mr.Romain A Duval
Download or read book Trade Integration and Business Cycle Synchronization written by Mr.Romain A Duval and published by International Monetary Fund. This book was released on 2014-04-03 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reexamines the relationship between trade integration and business cycle synchronization (BCS) using new value-added trade data for 63 advanced and emerging economies during 1995–2012. In a panel framework, we identify a strong positive impact of trade intensity on BCS—conditional on various controls, global common shocks and country-pair heterogeneity—that is absent when gross trade data are used. That effect is bigger in crisis times, pointing to trade as an important crisis propagation mechanism. Bilateral intra-industry trade and trade specialization correlation also appear to increase co-movement, indicating that not only the intensity but also the type of trade matters. Finally, we show that dependence on Chinese final demand in value-added terms amplifies the international spillovers and synchronizing impact of growth shocks in China.
Book Synopsis International Business Cycles by : David Backus
Download or read book International Business Cycles written by David Backus and published by . This book was released on 1993 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: We review recent work comparing properties of international business cycles with those of dynamic general equilibrium models, emphasizing two discrepancies between theory and data that we refer to as anomalies. The first is the consumption/output/productivity anomaly: in the data we generally find that the correlation across countries of output fluctuations is larger than the analogous consumption and productivity correlations. In theoretical economies we find, for a wide range of parameter values, that the consumption correlation exceeds the productivity and output correlations. The second anomaly concerns relative price movements: the standard deviation of the terms of trade is considerably larger in the data than it is in theoretical economies. We speculate on changes in theoretical structure that might bring theory and data closer together.
Book Synopsis Understanding the Implications of Trade and Financial Market Integration for Business Cycles by : Mario J. Crucini
Download or read book Understanding the Implications of Trade and Financial Market Integration for Business Cycles written by Mario J. Crucini and published by World Scientific Publishing Company. This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume is a collection of the author's scholarly work spanning a quarter century of inquiry into the causes of international business cycles. It starts with an introduction to international business cycle research. Part I reviews salient business cycle facts relating to quantities, prices and the driving forces of business cycles. Part II focuses on the role of risk-sharing and asset market structure in shaping business cycles and welfare. Part III deals with relative prices and the terms of trade stressing retail distribution, information frictions, and the need to tie commodity-specific shocks to particular nations or world regions. Part IV is a collection of work focusing on the inefficiencies brought about by the Hawley-Smoot tariffs and foreign retaliation. Further, because the tariffs were often specific (nominal amounts per physical quantity imported), they interacted with monetary policy in a way that exacerbated the Great Depression. The book provides the reader with an overview of key developments in international business cycle research that build upon the pioneering work of Nobel Laureates Finn Kydland and Edward Prescott, who built the first dynamic stochastic general equilibrium model of the closed economy, patterned along the lines of the US economy. As globalization has extended the span of international economic relationships, these modeling approaches have become essential for understanding business cycles today. These models and empirical methods are particularly relevant to our understanding of how domestic innovation, productivity change or policy action (fiscal, monetary and trade-related) feeds back across economies.
Book Synopsis What Happens During Recessions, Crunches and Busts? by : Mr.Ayhan Kose
Download or read book What Happens During Recessions, Crunches and Busts? written by Mr.Ayhan Kose and published by International Monetary Fund. This book was released on 2008-12-01 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide a comprehensive empirical characterization of the linkages between key macroeconomic and financial variables around business and financial cycles for 21 OECD countries over the period 1960–2007. In particular, we analyze the implications of 122 recessions, 112 (28) credit contraction (crunch) episodes, 114 (28) episodes of house price declines (busts), 234 (58) episodes of equity price declines (busts) and their various overlaps in these countries over the sample period. Our results indicate that interactions between macroeconomic and financial variables can play major roles in determining the severity and duration of recessions. Specifically, we find evidence that recessions associated with credit crunches and house price busts tend to be deeper and longer than other recessions. JEL Classification Numbers: E32; E44; E51; F42
