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Trade in capital goods and investment-specific technical change

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  • Boileau, Martin

Abstract

This paper studies the role of trade in capital goods and investment-specific technical change in the determination of the cross-country correlation of output and the volatility of the terms of trade. The cross-country correlation of output for G7 countries ranges from 0.42 to 0.85 and the relative volatility of the terms of trade ranges from 1.24 to 6.06. The standard model with total factor productivity change and trade in final goods only generates a cross-country correlation of 0.05 and a volatility of 0.68. Models that allow trade in capital goods and investment-specific technical change produce a cross-country correlation of at least 0.47 and a volatility of at least 3.86.
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  • Boileau, Martin, 2002. "Trade in capital goods and investment-specific technical change," Journal of Economic Dynamics and Control, Elsevier, vol. 26(6), pages 963-984, June.
    • Handle: RePEc:eee:dyncon:v:26:y:2002:i:6:p:963-984
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    Cited by:

    1. Erceg, Christopher J. & Guerrieri, Luca & Gust, Christopher, 2008. "Trade adjustment and the composition of trade," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2622-2650, August.
    2. repec:eee:inecon:v:108:y:2017:i:c:p:67-81 is not listed on IDEAS
    3. Jonathan Eaton & Samuel Kortum & Brent Neiman & John Romalis, 2016. "Trade and the Global Recession," American Economic Review, American Economic Association, vol. 106(11), pages 3401-3438, November.
    4. Takeuchi, Fumihide, 2011. "The role of production fragmentation in international business cycle synchronization in East Asia," Journal of Asian Economics, Elsevier, vol. 22(6), pages 441-459.
    5. Parantap Basu & Christoph Thoenissen, 2011. "International business cycles and the relative price of investment goods," Canadian Journal of Economics, Canadian Economics Association, vol. 44(2), pages 580-606, May.
    6. Baxter, Marianne & Farr, Dorsey D., 2005. "Variable capital utilization and international business cycles," Journal of International Economics, Elsevier, vol. 65(2), pages 335-347, March.
    7. Johri, Alok & Letendre, Marc-André & Luo, Daqing, 2011. "Organizational capital and the international co-movement of investment," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 511-523.
    8. Peter N. Ireland, 2013. "Stochastic Growth In The United States And Euro Area," Journal of the European Economic Association, European Economic Association, vol. 11(1), pages 1-24, February.
    9. M. Herrerias & Vicente Orts, 2012. "Equipment investment, output and productivity in China," Empirical Economics, Springer, vol. 42(1), pages 181-207, February.
    10. Maria Jesus Herrerias, 2010. "The Causal Relationship between Equipment Investment and Infrastructures on Economic Growth in China," Frontiers of Economics in China, Higher Education Press, vol. 5(4), pages 509-526, December.
    11. Millan L. B. Mulraine, 2005. "Investment-Specific Technology Shocks in a Small Open Economy," Macroeconomics 0506009, EconWPA.
    12. Cook, David, 2002. "Market entry and international propagation of business cycles," Journal of International Economics, Elsevier, vol. 56(1), pages 155-175, January.
    13. Alok Johri & Md Mahbubur Rahman, 2017. "The Rise and Fall of India's Relative Investment Price: A Tale of Policy Error and Reform," Department of Economics Working Papers 2017-12, McMaster University, revised 03 Oct 2017.
    14. Craighead, William, 2017. "Intermediate Goods and Exchange Rate Disconnect," MPRA Paper 83075, University Library of Munich, Germany.
    15. Michele Cavallo & Anthony Landry, 2018. "Capital-Goods Imports and US Growth," Staff Working Papers 18-1, Bank of Canada.
    16. Mulraine, Millan L. B., 2006. "Real Exchange Rate Dynamics With Endogenous Distribution Costs," MPRA Paper 9, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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