Country Size and Economic Fluctuations
AbstractThis paper investigates the character of business cycles across large and small economies. Empirically, G-7 countries have less volatile investment, consumption, and trade balance ratios, higher correlations between domestic saving and investment rates, and about the same correlation of the trade-balance ratio and investment ratio as 68 smaller countries. These observations are consistent with a standard one-sector two-country general equilibrium model in which the only source of heterogeneity is country size. Since many developing countries are small, these findings suggest that even absent differences in markets and institutions, economic fluctuations would be more severe in developing countries. Copyright 1997 by Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of International Economics.
Volume (Year): 5 (1997)
Issue (Month): 2 (May)
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