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Investment composition and international business cycles

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  • Oviedo, P. Marcelo
  • Singh, Rajesh
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    Abstract

    This paper studies a two country model with traded and nontraded sectors, in which sector-specific capital goods, as in practice, are produced by combining inputs from all sectors. The model also includes nontraded distribution services employed in retailing traded goods to consumers. The results show that the model with capital goods comprising multisectoral inputs outperforms the standard model in which sectoral output also serves as its capital. In particular, it substantially improves (a) the movements of trade balance and relative prices; (b) within country comovements of sectoral and aggregate quantities; (c) cross-country comovements of output vis-à-vis consumption. The results change only marginally when distribution services are removed from the model.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Economics.

    Volume (Year): 89 (2013)
    Issue (Month): 1 ()
    Pages: 79-95

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    Handle: RePEc:eee:inecon:v:89:y:2013:i:1:p:79-95

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    Web page: http://www.elsevier.com/locate/inca/505552

    Related research

    Keywords: International business cycles; Quantity anomaly; Distribution costs; Cross-country correlations;

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    References

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    21. Oviedo, P. Marcelo & Singh, Rajesh, 2013. "Investment composition and international business cycles," Staff General Research Papers 35585, Iowa State University, Department of Economics.
    22. Oviedo, P. Marcelo & Singh, Rajesh, 2012. "Investment Composition and International Business Cycles," Staff General Research Papers 35096, Iowa State University, Department of Economics.
    23. Heathcote, Jonathan & Perri, Fabrizio, 2002. "Financial autarky and international business cycles," Journal of Monetary Economics, Elsevier, vol. 49(3), pages 601-627, April.
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