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International Business Cycle Accounting

  • Keisuke Otsu

    (Faculty of Liberal Arts, Sophia University (E-mail: k-otsu@sophia.ac.jp))

In this paper, I extend the business cycle accounting method a la Chari, Kehoe and McGrattan (2007) to a two-country international business cycle model and quantify the effect of the disturbances in relevant markets on the business cycle correlation between Japan and the US over the 1980-2008 period. This paper finds that disturbances in the labor market and production efficiency are important in accounting for the recent increase in the cross-country output correlation. If international financial market integration is important for considering the recent increase in cross-country output correlation, it must operate through an increase in the cross-country correlation of disturbances in the labor market and production efficiency, and not in the domestic investment market.

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File URL: http://www.imes.boj.or.jp/research/papers/english/09-E-29.pdf
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Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 09-E-29.

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Date of creation: Nov 2009
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Handle: RePEc:ime:imedps:09-e-29
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