Working Paper: CEPR ID: DP781
Authors: Fabio Canova
Abstract: This paper studies the generation and the transmission of international business cycles in a multi-country model with production and consumption interdependencies. Two sources of disturbances are considered and three channels for propagation of shocks are compared. Simulations are performed for symmetric countries and for countries that differ either in preferences, technologies, fiscal policies, wealth or exogenous processes. Production interdependencies determine the charateristics of the propagation of technology shocks while consumption interdependencies are responsible for the transmission of government shocks. Government shocks that are mildly correlated across countries are more successful than technology shocks in reproducing actual data.
Keywords: business cycles; transmission; interdependence; government expenditure; technology shocks
JEL Codes: C68; E32; F11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| government expenditure shocks (H59) | consumption goods' net exports (E20) |
| technology shocks (D89) | investment goods' net exports (E20) |
| technology shocks (D89) | production interdependencies (L23) |
| government expenditure shocks (H59) | consumption interdependencies (D10) |
| contemporaneous correlation in shocks across countries (F44) | model's ability to reproduce actual output fluctuations (C59) |
| model's parameters varied for heterogeneity (C21) | different responses to shocks (E32) |
| quantitative features sensitive to parameter choices (C52) | uncertainty in findings (D80) |