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Heckscher-Ohlin Business Cycles

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  • Alejandro Cuñat
  • Marco Maffezzoli

Abstract

This paper introduces Heckscher-Ohlin trade features into a two-country DSGE model, and studies how productivity shocks propagate through trade in goods. In comparison with standard models, (i) transitory shocks to productivity have permanent effects on country-level aggregate variables; (ii) aggregate productivity shocks have relevant effects on the sectoral allocation of production factors; (iii) the business cycle properties of our model are broadly compatible with the empirical evidence; (iv) under complete asset markets, the international correlation of consumption is lower than that of output.

Suggested Citation

  • Alejandro Cuñat & Marco Maffezzoli, "undated". "Heckscher-Ohlin Business Cycles," Working Papers 210, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  • Handle: RePEc:igi:igierp:210
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    Cited by:

    1. Rodrigues, Mauro, 2010. "Import substitution and economic growth," Journal of Monetary Economics, Elsevier, vol. 57(2), pages 175-188, March.
    2. Chatterjee, Partha & Shukayev, Malik, 2012. "A stochastic dynamic model of trade and growth: Convergence and diversification," Journal of Economic Dynamics and Control, Elsevier, vol. 36(3), pages 416-432.
    3. Jiandong Ju & Kang Shi & Shang-Jin Wei, 2012. "Trade Reforms and Current Account Imbalances: When Does the General Equilibrium Effect Overturn a Partial Equilibrium Intuition?," NBER Working Papers 18653, National Bureau of Economic Research, Inc.
    4. Igor Fedotenkov & Lex Meijdam, 2013. "Crisis and Pension System Design in the EU: International Spillover Effects Via Factor Mobility and Trade," De Economist, Springer, vol. 161(2), pages 175-197, June.
    5. Ju, Jiangdong & Shi, Kang & Wei, Shang-Jin, 2013. "Trade reforms and current account imbalances," BOFIT Discussion Papers 25/2013, Bank of Finland, Institute for Economies in Transition.
    6. Claustre Bajona & Timothy J. Kehoe, 2006. "Demographics in dynamic Heckscher-Ohlin models: overlapping generations versus infinitely lived consumers," Staff Report 377, Federal Reserve Bank of Minneapolis.
    7. Almuth Scholl, 2002. "Limited Enforceable International Loans, International Risk Sharing and Trade," SFB 649 Discussion Papers SFB649DP2005-055, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany, revised Aug 2005.
    8. Rzigui, Lotfi, 2005. "External shocks and economic fluctuations: evidence from Tunisia," MPRA Paper 630, University Library of Munich, Germany, revised Dec 2005.
    9. Jiandong Ju & Kang Shi & Shang-Jin Wei, 2011. "On the Connections between Intertemporal and Intra-temporal Trades," NBER Working Papers 17549, National Bureau of Economic Research, Inc.
    10. Jin, Keyu, 2009. "Industrial structure and financial capital flows," LSE Research Online Documents on Economics 25827, London School of Economics and Political Science, LSE Library.
    11. Sen, Partha, 2015. "Uncertain lifetimes and convergence in a two-country Heckscher–Ohlin model," Mathematical Social Sciences, Elsevier, vol. 78(C), pages 14-20.
    12. Fedotenkov, I., 2012. "Pensions and ageing in a globalizing world. International spillover effects via trade and factor mobility," Other publications TiSEM 8830bc21-4138-4479-8459-a, Tilburg University, School of Economics and Management.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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