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Vertical Specialization and International Business Cycle Synchronization

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  • Costas Arkolakis
  • Ananth Ramanarayanan

Abstract

We explore the impact of vertical specialization-trade in goods across multiple stages of production-on the relationship between trade and business cycle synchronization across countries. We develop an international business cycle model in which the degree of vertical specialization varies with trade barriers. With perfect competition, we show analytically that fluctuations in measured total factor productivity are not linked across countries through trade. In numerical simulations, we find little dependence of business cycle synchronization on trade intensity. An extension of the model to allow for imperfect competition has the potential to resolve these shortcomings. Copyright The editors of the "Scandinavian Journal of Economics" 2009 .

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 111 (2009)
Issue (Month): 4 (December)
Pages: 655-680

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Handle: RePEc:bla:scandj:v:111:y:2009:i:4:p:655-680

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  1. César Calderón & Alberto Chong & Ernesto Stein, 2002. "Trade Intensity and Business Cycle Synchronization: Are Developing Countries Any Different?," Working Papers Central Bank of Chile 195, Central Bank of Chile.
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Citations

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Cited by:
  1. Benjamin Bridgman, 2013. "International Supply Chains And The Volatility Of Trade," Economic Inquiry, Western Economic Association International, vol. 51(4), pages 2110-2124, October.
  2. Luciana Juvenal, Luciana; Santos Monteiro, Paulo, 2010. "Trade and Synchronization in a Multi-Country Economy," CAGE Online Working Paper Series 31, Competitive Advantage in the Global Economy (CAGE).
  3. Ewa Szymanik, 2012. "Business Cycles and Their International Transmission – the Introduction to the Problem," Equilibrium, Uniwersytet Mikolaja Kopernika, vol. 7, pages 55-72.
  4. Pundit,Madhavi, 2013. "Comovement in business cycles and trade in intermediate goods," Working Papers 13/116, National Institute of Public Finance and Policy.
  5. Cacciatore, Matteo, 2014. "International trade and macroeconomic dynamics with labor market frictions," Journal of International Economics, Elsevier, vol. 93(1), pages 17-30.
  6. Julian di Giovanni & Andrei A. Levchenko, 2010. "Putting the Parts Together: Trade, Vertical Linkages, and Business Cycle Comovement," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 95-124, April.
  7. Ana Santacreu, 2012. "The Trade Comovement Puzzle and the Margins of International Trade," 2012 Meeting Papers 34, Society for Economic Dynamics.
  8. Davis, J. Scott & Huang, Kevin X.D., 2011. "International real business cycles with endogenous markup variability," Journal of International Economics, Elsevier, vol. 85(2), pages 302-316.
  9. Andrei Zlate, 2010. "Offshore production and business cycle dynamics with heterogeneous firms," International Finance Discussion Papers 995, Board of Governors of the Federal Reserve System (U.S.).
  10. Matteo Cacciatore, 2012. "International Trade and Macroeconomic Dynamics with Labor Market Frictions," 2012 Meeting Papers 875, Society for Economic Dynamics.
  11. Jacob Wibe, 2012. "The Role of Production Sharing and Trade in the Transmission of the Great Recession," University of Western Ontario, Economic Policy Research Institute Working Papers 20123, University of Western Ontario, Economic Policy Research Institute.
  12. Wei Liao & Ana Maria Santacreu, 2012. "The Trade Comovement Puzzle and the Margins of International Trade," Working Papers 042012, Hong Kong Institute for Monetary Research.
  13. Virgiliu Midrigan & Joe Kaboski & George Alessandria, 2012. "Trade, Inventories, and International Business Cycles," 2012 Meeting Papers 762, Society for Economic Dynamics.

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