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International Business Cycle Accounting

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  • Keisuke Otsu

    (Faculty of Liberal Arts, Sophia University (E-mail: k-otsu@sophia.ac.jp))

Abstract

In this paper, I extend the business cycle accounting method a la Chari, Kehoe and McGrattan (2007) to a two-country international business cycle model and quantify the effect of the disturbances in relevant markets on the business cycle correlation between Japan and the US over the 1980-2008 period. This paper finds that disturbances in the labor market and production efficiency are important in accounting for the recent increase in the cross-country output correlation. If international financial market integration is important for considering the recent increase in cross-country output correlation, it must operate through an increase in the cross-country correlation of disturbances in the labor market and production efficiency, and not in the domestic investment market.

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Bibliographic Info

Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 09-E-29.

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Date of creation: Nov 2009
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Handle: RePEc:ime:imedps:09-e-29

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Keywords: Business Cycle Accounting; International Business Cycles;

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  1. Keiichiro Kobayashi & Masaru Inaba, 2006. "Business cycle accounting for the Japanese economy," 2006 Meeting Papers, Society for Economic Dynamics 313, Society for Economic Dynamics.
  2. NUTAHARA Kengo & INABA Masaru, 2008. "On Equivalence Results in Business Cycle Accounting," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 08015, Research Institute of Economy, Trade and Industry (RIETI).
  3. Corsetti, Giancarlo & Dedola, Luca & Leduc, Sylvain, 2004. "International risk-sharing and the transmission of productivity shocks," Working Paper Series, European Central Bank 0308, European Central Bank.
  4. David K. Backus & Gregor W. Smith, 1993. "Consumption and Real Exchange Rates in Dynamic Economies with Non-Traded Goods," Working Papers, Queen's University, Department of Economics 1252, Queen's University, Department of Economics.
  5. 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, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 821-54, November.
  6. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, American Economic Association, vol. 78(3), pages 402-17, June.
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  13. Jonathan Heathcote & Fabrizio Perri, 2003. "Why Has the U.S. Economy Become Less Correlated with the Rest of the World?," American Economic Review, American Economic Association, American Economic Association, vol. 93(2), pages 63-69, May.
  14. Raffo, Andrea, 2008. "Net exports, consumption volatility and international business cycle models," Journal of International Economics, Elsevier, Elsevier, vol. 75(1), pages 14-29, May.
  15. Chakraborty, Suparna, 2009. "The boom and the bust of the Japanese economy: A quantitative look at the period 1980-2000," Japan and the World Economy, Elsevier, Elsevier, vol. 21(1), pages 116-131, January.
  16. Wen, Yi, 2007. "By force of demand: Explaining international comovements," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 31(1), pages 1-23, January.
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Citations

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Cited by:
  1. Keisuke Otsu, 2012. "How well can business cycle accounting account for business cycles?," Economics Bulletin, AccessEcon, vol. 32(2), pages 1774-1784.
  2. Jagjit S. Chadha & James Warren, 2012. "Accounting for the Great Recession in the UK: Real Business Cycles and Financial Frictions," Studies in Economics, Department of Economics, University of Kent 1207, Department of Economics, University of Kent.
  3. Sustek, Roman, 2009. "Monetary Business Cycle Accounting," MPRA Paper 17518, University Library of Munich, Germany.
  4. Chakraborty, Suparna & Otsu, Keisuke, 2012. "Deconstructing Growth - A Business Cycle Accounting Approach with application to BRICs," MPRA Paper 41076, University Library of Munich, Germany.
  5. Pedro Brinca, 2013. "Distortions in the Neoclassical Growth Model: A Cross-Country Analysis," GEMF Working Papers 2013-24, GEMF - Faculdade de Economia, Universidade de Coimbra.
  6. Hideaki Hirata & Keisuke Otsu, 2011. "Accounting for the economic relationship between Japan and the Asian Tigers," Studies in Economics, Department of Economics, University of Kent 1120, Department of Economics, University of Kent.
  7. Junsang Lee & Keisuke Otsu, 2011. "The Credit Spread and U.S. Business Cycles," Studies in Economics, Department of Economics, University of Kent 1123, Department of Economics, University of Kent.
  8. Yue ZHAO, 2013. "Role of Financial and Productivity Shocks in the US and Japan: A Two-Country Economy," KIER Working Papers, Kyoto University, Institute of Economic Research 881, Kyoto University, Institute of Economic Research.

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