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Global versus country-specific shocks and international business cycles

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  • Boileau, Martin
  • Normandin, Michel
  • Powo Fosso, Bruno

Abstract

We study the contributions of global and country-specific shocks to international business cycles. To do so, we decompose technology and government expenditures for the US and an aggregate of non-US G7 countries into global and country-specific components using a Kalman-filter procedure. We then analyze how these components affect the fluctuations of key macroeconomic variables from two versions of an international real business cycle model. The complete markets version assumes that consumers trade a complete set of contingent assets, while the incomplete markets version assumes that consumers trade a non-contingent bond. Our analysis suggests that global and country-specific technology shocks are important, but that global and country-specific government expenditures shocks are not. Country-specific technology shocks explain most of the conventional within-country business cycle statistics, while global and country-specific technology shocks are both required to explain the cross-country correlations of output and consumption.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 1 (March)
Pages: 1-16

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:1:p:1-16

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: General equilibrium Kalman filter Symmetric economies;

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Cited by:
  1. Zeno Enders & Gernot J. Mueller, 2006. "S-Curve Redux: On the International Transmission of Technology Shocks," Economics Working Papers ECO2006/36, European University Institute.
  2. Enders, Zeno & Müller, Gernot J., 2009. "On the international transmission of technology shocks," Journal of International Economics, Elsevier, vol. 78(1), pages 45-59, June.
  3. Marek Lubiński, 2007. "International Business Cycle," Contemporary Economics, University of Finance and Management in Warsaw, vol. 1(2), June.

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