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Modeling News-Driven International Business Cycles

Author

Listed:
  • Paul Beaudry

    (University of British Columbia)

  • Martial Dupaigne

    (Toulouse School of Economics)

  • Franck Portier

    (Toulouse School of Economics)

Abstract

This paper reexamines the question of how to explain business cycle co-movements within and between countries. First, we present a simple flexible price models to illustrate how and why news shocks can generate robust positive co-movements in economic activity across countries. We also discuss under what conditions a two-sector version of the model generates appropriate business cycle patterns within countries. Second, we develop a quantitative two-country two-sector model that is capable of replicating news driven international business cycles. The model is a two-country extension of the closed economy model of Beaudry & Portier [2004], in which there are limited possibilities to reallocate factors between investment and consumption good sectors. (Copyright: Elsevier)

Suggested Citation

  • Paul Beaudry & Martial Dupaigne & Franck Portier, 2011. "Modeling News-Driven International Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(1), pages 72-91, January.
    • Handle: RePEc:red:issued:09-245
    DOI: 10.1016/j.red.2010.11.002
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    References listed on IDEAS

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    1. Beaudry, Paul & Collard, Fabrice & Portier, Franck, 2011. "Gold rush fever in business cycles," Journal of Monetary Economics, Elsevier, vol. 58(2), pages 84-97, March.
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    More about this item

    Keywords

    Business cycles; Expectations; International fluctuations; News shocks;
    All these keywords.

    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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