We ask whether a two-country real business cycle model can account simultaneously for domestic and international aspects of business cycles. With this question in mind, we document a number of discrepancies between theory and data. The most striking discrepancy concerns the correlations of consumption and output across countries. In the data, outputs are generally more highly correlated across countries than consumptions. In the model we see the opposite.
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Publisher Info
Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number
146.
Length: Date of creation: 1991 Date of revision: Publication status: Published in Journal of Political Economy (Vol.100, n.4, August 1992, pp. 745-775) Handle: RePEc:fip:fedmsr:146
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