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North-South business cycles

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Author Info
Michael A. Kouparitsas

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Abstract

This paper shows that the economic activity of the industrial North and developing South move together - when the North is above its trend, the South tends to be above its trend. We refer to this phenomenon as the "North-South business cycle." The paper develops a quantitative general equilibrium model of North-South trade that captures many cyclical features of North-South trade and production data. In particular, the high volatility of North-South terms of trade, and strong comovement of Northern and Southern activity. On the basis of this model we argue that North-South business cycles emerge because shocks originating in the North are transmitted to the South through international goods and assets trade.

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Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series, Macroeconomic Issues with number 96-9.

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Date of creation: 1996
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Handle: RePEc:fip:fedhma:96-9

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Keywords: Business cycles International trade Production (Economic theory)

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  1. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1993. "International Business Cycles: Theory and Evidence," Working Papers 93-21, New York University, Leonard N. Stern School of Business, Department of Economics.
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  2. Marianne Baxter, 1995. "International Trade and Business Cycles," NBER Working Papers 5025, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Matthew D. Shapiro, 1987. "Measuring Market Power in U.S. Industry," NBER Working Papers 2212, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. 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. [Downloadable!]
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  5. David K. Backus & Patrick J. Kehoe, 1992. "International Evidence on the Historical Properties of Business Cycles," Working Papers 92-5, New York University, Leonard N. Stern School of Business, Department of Economics.
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  6. Eduardo Borensztein & Carmen Reinhart, 1994. "The Macroeconomic Determinants of Commodity Prices," IMF Working Papers 94/9, International Monetary Fund.
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  7. Ramey, Valerie A, 1989. "Inventories as Factors of Production and Economic Fluctuations," American Economic Review, American Economic Association, vol. 79(3), pages 338-54, June. [Downloadable!] (restricted)
  8. Moutos, Thomas & Vines, David, 1989. "The Simple Macroeconomics of North-South Interaction," American Economic Review, American Economic Association, vol. 79(2), pages 270-76, May. [Downloadable!] (restricted)
  9. McKibbin, Warwick J. & Sundberg, Mark W., 1993. "Implications for the Asia-Pacific region of coordination of macroeconomic policies in the OECD," Journal of Policy Modeling, Elsevier, vol. 15(1), pages 13-48, February. [Downloadable!] (restricted)
  10. Shapiro, Matthew D, 1987. "Are Cyclical Fluctuations in Productivity Due More to Supply Shocks or Demand Shocks?," American Economic Review, American Economic Association, vol. 77(2), pages 118-24, May. [Downloadable!] (restricted)
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  11. Chichilnisky, Graciela, 1981. "Terms of trade and domestic distribution : Export-led growth with abundant labour," Journal of Development Economics, Elsevier, vol. 8(2), pages 163-192, April. [Downloadable!] (restricted)
  12. Findlay, Ronald, 1984. "Growth and development in trade models," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 4, pages 185-236 Elsevier. [Downloadable!] (restricted)
  13. Baxter, Marianne & Crucini, Mario J, 1995. "Business Cycles and the Asset Structure of Foreign Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 821-54, November. [Downloadable!] (restricted)
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  14. Burgstaller, A. & Saavedra-Rivano, N., 1984. "Capital mobility and growth in a North-South model," Journal of Development Economics, Elsevier, vol. 15(1-3), pages 213-237. [Downloadable!] (restricted)
  15. Baxter, Marianne & Crucini, Mario J, 1993. "Explaining Saving-Investment Correlations," American Economic Review, American Economic Association, vol. 83(3), pages 416-36, June. [Downloadable!] (restricted)
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  16. Michael A. Kouparitsas, 1997. "North-South terms of trade: an empirical investigation," Working Paper Series, Macroeconomic Issues WP-97-5, Federal Reserve Bank of Chicago. [Downloadable!]
  17. Michael A. Kouparitsas, 1996. "North-South financial integration and business cycles," Working Paper Series, Macroeconomic Issues 96-10, Federal Reserve Bank of Chicago. [Downloadable!]
  18. McIntosh, James, 1986. "North-south trade : Export-led Growth with Abundant Labour," Journal of Development Economics, Elsevier, vol. 24(1), pages 141-152, November. [Downloadable!] (restricted)
  19. Baxter, Marianne, 1992. "Fiscal Policy, Specialization, and Trade in the Two-Sector Model: The Return of Ricardo?," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 713-44, August. [Downloadable!] (restricted)
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  20. Chichilnisky, Graciela, 1984. "North-South trade and exported-led policies," Journal of Development Economics, Elsevier, vol. 15(1-3), pages 131-160. [Downloadable!] (restricted)
  21. Marianne Baxter & Robert G. King, 1995. "Measuring Business Cycles Approximate Band-Pass Filters for Economic Time Series," NBER Working Papers 5022, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  22. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232. [Downloadable!] (restricted)
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