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Bilateral Linkages and the International Transmission of Business Cycles

Author

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  • Lance Kent

    (Department of Economics, College of William and Mary)

Abstract

This paper estimates the contributions of trade and financial linkages to the directed graph that describes the international propagation of macroeconomic shocks at the business cycle frequency. Among the findings: import and export intensity are asymmetrically associated with shock transmission; bilateral portfolio equity holdings are associated with comovement within the quarter but not between quarters; the import of goods used for capital formation is strongly associated with shock transmission both within and between quarters. The novel stylized facts refine the “trade-comovement” puzzle into the “trade-correlation” and the “trade-transmission puzzles, both of which are challenges for standard international business cycle models.

Suggested Citation

  • Lance Kent, 2014. "Bilateral Linkages and the International Transmission of Business Cycles," Working Papers 149, Department of Economics, College of William and Mary.
    • Handle: RePEc:cwm:wpaper:149
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    File URL: http://economics.wm.edu/wp/cwm_wp149_rev1.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    International Business Cycles; International Panel VAR; Trade and Financial Integration; Comovement; International Real Business Cycle Model.;
    All these keywords.

    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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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