Closing international real business cycle models with restricted financial markets
Abstract
Several authors argue that international real business cycle (IRBC) models with incomplete financial markets offer a good explanation of the ranking of cross-country correlations. This conclusion is suspect, because it is based on an analysis of the near steady state dynamics using a linearized system of equations. The baseline IRBC model with incomplete markets does not possess a unique deterministic steady state and, as a result, its linear system of difference equations is not stationary. We show that the ranking of cross-country correlations is robust to modifications that ensure a unique steady state and a stationary system of linear difference equations. We find, however, that the modifications affect the quantitative predictions of the model.Download Info
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Bibliographic Info
Article provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 27 (2008)
Issue (Month): 5 (September)
Pages: 733-756
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Web page: http://www.elsevier.com/locate/inca/30443
Related research
Keywords:Other versions of this item:
- Michel Normandin & Martin Boileau, 2005. "Closing International Real Business Cycle Models with Restricted Financial Markets," Cahiers de recherche 05-03, HEC Montréal, Institut d'économie appliquée.
- Martin Boileau & Michel Normandin, 2005. "Closing International Real Business Cycle Models with Restricted Financial Markets," Cahiers de recherche 0506, CIRPEE.
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
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