"News" Shocks in International Business Cycles
AbstractThis paper studies co-movement in economic aggregates at the national and international level. At the national level, consumption, investment and hours worked display positive co-movement across the business cycle. Technology shocks, which directly affect the real wage rate, can drive consumption and hours worked in the same direction although consumption and leisure are both normal goods. At the international level, business cycles are substantially synchronized. The well-known first order effect of a technology shock is to reallocate production factor across countries, leading to strong negative co-movements between investments or between outputs. Such predictions are at odds with observed international fluctuations. We investigate whether observed co-movements can be accounted for by the changes in expectations emphasized in Beaudry & Portier [2004,2005]. Previous results have established the conditions under which expectations-driven business cycle fluctuations may arise in neo-classical settings, namely a cost complementarity. We extend this complementarity to a multi-country model, and show that they can lead to international expectations-driven business cycles.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 473.
Date of creation: 03 Dec 2006
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
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Macro; International Business Cycles; News Shocks;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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- Mario Forni & Luca Gambetti & Luca Sala, 2011.
"No News in Business Cycles,"
535, Barcelona Graduate School of Economics.
- Mario Forni & Luca Gambetti & Luca Sala, 2011. "No news in business cycles," Center for Economic Research (RECent) 063, University of Modena and Reggio E., Dept. of Economics.
- Mario Forni & Luca Gambetti & Luca Sala, 2013. "No News in Business Cycles," Working Papers 491, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Forni, Mario & Gambetti, Luca & Sala, Luca, 2011. "No News in Business Cycles," CEPR Discussion Papers 8274, C.E.P.R. Discussion Papers.
- Mario Forni & Luca Gambetti & Luca Sala, 2011. "No News in Business Cycles," UFAE and IAE Working Papers 862.11, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Mario Forni & Luca Gambetti & Luca Sala, 2011. "No News in Business Cycles," Working Papers 383, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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