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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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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 26 (2002)
Issue (Month): 6 (June)
Pages: 963-984

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Handle: RePEc:eee:dyncon:v:26:y:2002:i:6:p:963-984
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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Find related papers by 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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  1. Backus, David K. & Crucini, Mario J., 2000. "Oil prices and the terms of trade," Journal of International Economics, Elsevier, vol. 50(1), pages 185-213, February.
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  17. repec:fth:bosecd:109 is not listed on IDEAS
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Cited by:

  1. 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.
  2. 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.
  3. M. Herrerias & Vicente Orts, 2012. "Equipment investment, output and productivity in China," Empirical Economics, Springer, vol. 42(1), pages 181-207, February.
  4. 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.
  5. 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.
  6. 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, 02.
  7. Cook, David, 2002. "Market entry and international propagation of business cycles," Journal of International Economics, Elsevier, vol. 56(1), pages 155-175, January.
  8. 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.
  9. 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.
  10. Mulraine, Millan L. B., 2005. "Investment-Specific Technology Shocks in a Small Open Economy," MPRA Paper 7, University Library of Munich, Germany, revised Aug 2006.
  11. Mulraine, Millan L. B., 2006. "Real Exchange Rate Dynamics With Endogenous Distribution Costs," MPRA Paper 9, University Library of Munich, Germany.
  12. 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.

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