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Investment composition and international business cycles

  • Oviedo, P. Marcelo
  • Singh, Rajesh
Registered author(s):

    This paper studies a two country model with traded and nontraded sectors, in which sector-specific capital goods, as in practice, are produced by combining inputs from all sectors. The model also includes nontraded distribution services employed in retailing traded goods to consumers. The results show that the model with capital goods comprising multisectoral inputs outperforms the standard model in which sectoral output also serves as its capital. In particular, it substantially improves (a) the movements of trade balance and relative prices; (b) within country comovements of sectoral and aggregate quantities; (c) cross-country comovements of output vis-à-vis consumption. The results change only marginally when distribution services are removed from the model.

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    File URL: http://www.sciencedirect.com/science/article/pii/S002219961200089X
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    Article provided by Elsevier in its journal Journal of International Economics.

    Volume (Year): 89 (2013)
    Issue (Month): 1 ()
    Pages: 79-95

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    Handle: RePEc:eee:inecon:v:89:y:2013:i:1:p:79-95
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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