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"News" Shocks in International Business Cycles


  • Martial Dupaigne
  • Franck Portier

    () (Economics Universite de Toulouse)


This paper studies co-movement in economic aggregates at the national and international level. At the national level, consumption, investment and hours worked display positive co-movement across the business cycle. Technology shocks, which directly affect the real wage rate, can drive consumption and hours worked in the same direction although consumption and leisure are both normal goods. At the international level, business cycles are substantially synchronized. The well-known first order effect of a technology shock is to reallocate production factor across countries, leading to strong negative co-movements between investments or between outputs. Such predictions are at odds with observed international fluctuations. We investigate whether observed co-movements can be accounted for by the changes in expectations emphasized in Beaudry & Portier [2004,2005]. Previous results have established the conditions under which expectations-driven business cycle fluctuations may arise in neo-classical settings, namely a cost complementarity. We extend this complementarity to a multi-country model, and show that they can lead to international expectations-driven business cycles.

Suggested Citation

  • Martial Dupaigne & Franck Portier, 2006. ""News" Shocks in International Business Cycles," 2006 Meeting Papers 473, Society for Economic Dynamics.
  • Handle: RePEc:red:sed006:473

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    Cited by:

    1. Mario Forni & Luca Gambetti & Luca Sala, 2014. "No News in Business Cycles," Economic Journal, Royal Economic Society, vol. 124(581), pages 1168-1191, December.

    More about this item


    Macro; International Business Cycles; News Shocks;

    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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