Business Cycles and the Asset Structure of Foreign Trade
AbstractInternational financial markets are widely believed to be important for the international transmission of business cycles since they determine the extent to which individuals can smooth consumption in the presence of country-specific shocks to income. Using a two-country equilibrium model with restricted asset trade, the authors find that the absence of complete financial integration may not be important if shocks to national economies have low persistence or are transmitted rapidly across countries. However, if shocks are highly persistent or are not transmitted internationally, the extent of financial integration is central to the international transmission of business cycles. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 36 (1995)
Issue (Month): 4 (November)
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Other versions of this item:
- Baxter, M. & Crucini, M., 1991. "Business Cycles and the Asset Structure of Foreign Trade," RCER Working Papers 316, University of Rochester - Center for Economic Research (RCER).
- Marianne Baxter & Mario J. Crucini, 1992. "Business cycles and the asset structure of foreign trade," Discussion Paper / Institute for Empirical Macroeconomics 59, Federal Reserve Bank of Minneapolis.
- Marianne Baxter & Mario J. Crucini, 1994. "Business Cycles and the Asset Structure of Foreign Trade," NBER Working Papers 4975, National Bureau of Economic Research, Inc.
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F30 - International Economics - - International Finance - - - General
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