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Imported Capital Goods and Open Economy Business Cycles

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Author Info
Reinout De Bock () (Economics Northwestern University)

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Abstract

This paper examines the business cycle properties of capital goods trade in open economies. Capital good imports and exports are twice as volatile as investment. Equipment trade is asymmetric in that small countries are net importers. Countercyclical trade balances are associated with procyclical equipment imports rather than countercyclical exports. Both observations hold a fortiori for emerging economies. Real interest rates are acyclical in developed economies. In emerging economies real interest rates are countercyclical and there is a strong positive correlation of equipment imports with real interest rates. I then examine if these features are consistent with properly calibrated open economy business cycle models

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Publisher Info
Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 706.

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Date of creation: 03 Dec 2006
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Handle: RePEc:red:sed006:706

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Related research
Keywords: International real business cycles; Small open economy;

Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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This page was last updated on 2009-10-30.

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