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Bilateral Linkages and the International Transmission of Business Cycles

  • Lance Kent

    ()

    (Department of Economics, College of William and Mary)

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.

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Paper provided by Department of Economics, College of William and Mary in its series Working Papers with number 149.

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Length: 57 pages
Date of creation: 15 Mar 2014
Date of revision:
Handle: RePEc:cwm:wpaper:149
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  17. Kei-Mu Yi & M. Ayhan Kose, 2005. "Can the Standard International Business Cycle Model Explain the Relation Between Trade and Comovement?," IMF Working Papers 05/204, International Monetary Fund.
  18. Stephane Dees & Arthur Saint-Guilhem, 2011. "The role of the United States in the global economy and its evolution over time," Empirical Economics, Springer, vol. 41(3), pages 573-591, December.
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  23. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, June.
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