When an economic boom produces high output, employment, and investment in the United States, there is usually a simultaneous boom in other industrialized countries. But, why? Answering this question is a central goal of international macroeconomics. However, multi-country dynamic equilibrium models have struggled with two major problems. The first difficulty is that the productivity shocks required by the model are implausibly large and volatile. Second, these models have difficulty explaining why factor inputs move together so closely across countries: realistic international comovement of business cycles requires implausibly high cross-country correlations of productivity shocks. This paper builds a model in which the utilization rates of capital and labor can be varied in response to shocks. We find that variable factor utilization is quite successful in (i) reducing the required size of productivity shocks; and (ii) increasing international comovement of factor inputs, with most of the improvement stemming from variable capital utilization.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
8392.
Length: Date of creation: Jul 2001 Date of revision: Handle: RePEc:nbr:nberwo:8392
Note: EFG IFM ITI Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A. Phone: 617-868-3900 Email: Web page: http://www.nber.org More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: ().
Related research
Keywords:
Other versions of this item:
Find related papers by JEL classification: F2 - International Economics - - International Factor Movements and International Business F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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)
Other versions:
Killingsworth, Mark R. & Heckman, James J., 1987.
"Female labor supply: A survey,"
Handbook of Labor Economics,
in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 2, pages 103-204
Elsevier.
[Downloadable!] (restricted)
King, Robert G. & Rebelo, Sergio T., 1999.
"Resuscitating real business cycles,"
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007
Elsevier.
[Downloadable!] (restricted)
Other versions:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)