International Transmission of Shocks in a Business-Cycle Model Under Imperfect Competition
AbstractThis paper investigates the effects of introducing imperfect competition inan international business-cycle model. We provide some internationalevidence on markups and analyze the implications of increasing returns toscale and monopolistic competition for the effects and the internationaltransmission of technology and government spending shocks. We also considerexogenous markup fluctuations as a source of shocks and of transmission ofbusiness cycles. We show that imperfect competition improves the behavior ofa standard model driven by technology shocks, although the behavior offoreign trade variables remains unexplained. We also show that animperfectly competitive model driven by government shocks can explain theinternational business cycle at least as well as a model driven bytechnology shocks.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 3 (1999)
Issue (Month): 03 (September)
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- Romain Restout, 2008.
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- T.C.Y. Kam & G.C. Lim, 2001. "Interest Rate Smoothing and Inflation-Output Variabilityin a Small Open Economy," Department of Economics - Working Papers Series 817, The University of Melbourne.
- Olivero, María Pía, 2010. "Market power in banking, countercyclical margins and the international transmission of business cycles," Journal of International Economics, Elsevier, vol. 80(2), pages 292-301, March.
- Kam, Timothy, 2007. "Interest-rate smoothing in a two-sector small open economy," Journal of Macroeconomics, Elsevier, vol. 29(2), pages 283-304, June.
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