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Business Cycles and Exchange Rate Regimes

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Are business cycles different according to the exchange rate regime? Baxter & Stockman (1989) have inconclusive results. We reinvestigate this question with more recent data and a different methodology and find evidence, for some aggregates, that their business cycle behavior has changed. We then try to replicate this change with an international real business cycle model with exchange rate shocks. Les cycles économiques sont-ils différents selon le régime de taux de change? Baxter & Stockman (1989) n'obtiennent pas de réponse définitive à cette question. Nous la réexaminons avec des données plus récentes et une méthodologie différente et trouvons qu'il y a eu changement, du moins pour certains agrégats économiques. Ensuite, nous cherchons à répliquer ce fait au moyen d'un modèle du cycle réel international augmenté de chocs exogènes sur le taux de change réel.

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Bibliographic Info

Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 45.

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Length: 22 pages
Date of creation: Nov 1996
Date of revision:
Handle: RePEc:cre:crefwp:45

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Related research

Keywords: open economy macroeconomics; real business cycle models; exchange rates; international trade;

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  1. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Christian Zimmermann, 1996. "International Real Business Cycles among Heterogeneous Countries," Macroeconomics 9607002, EconWPA.
  3. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1991. "International real business cycles," Staff Report 146, Federal Reserve Bank of Minneapolis.
  4. Gerlach, H M Stefan, 1988. "World Business Cycles under Fixed and Flexible Exchange Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(4), pages 621-32, November.
  5. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, vol. 84(1), pages 84-103, March.
  6. Christian Zimmermann, 1994. "International Business Cycles and Exchange Rates," Cahiers de recherche CREFE / CREFE Working Papers 33, CREFE, Université du Québec à Montréal, revised Jul 1997.
  7. Baxter, Marianne & Stockman, Alan C., 1989. "Business cycles and the exchange-rate regime : Some international evidence," Journal of Monetary Economics, Elsevier, vol. 23(3), pages 377-400, May.
  8. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  9. Marianne Baxter & Alan C. Stockman, 1988. "Business Cycles and the Exchange Rate System: Some International Evidence," NBER Working Papers 2689, National Bureau of Economic Research, Inc.
  10. Christian Zimmermann, 1994. "Technology Innovations and the Volatility of Output: An International Perspective," Cahiers de recherche CREFE / CREFE Working Papers 34, CREFE, Université du Québec à Montréal.
  11. Don E. Schlagenhauf & Jeffry M. Wrase, 1992. "A monetary, open-economy model with capital mobility," Discussion Paper / Institute for Empirical Macroeconomics 67, Federal Reserve Bank of Minneapolis.
  12. John Whalley, 1984. "Trade Liberalization among Major World Trading Areas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262231204, December.
  13. Don E. Schlagenhauf & Jeffrey M. Wrase, 1992. "Liquidity and real activity in a simple open economy model," Discussion Paper / Institute for Empirical Macroeconomics 57, Federal Reserve Bank of Minneapolis.
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