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International business cycles with heterogeneous sectors

Jin, Keyu (2009) International business cycles with heterogeneous sectors. London School of Economics and Political Science, London, UK. (Unpublished)

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Abstract

The `quantity anomalies' that arise from standard international business cycle models are cross-country correlations in consumption being higher than output, and negative comovement in aggregate investment and employment. This paper shows that incorporating multiple sectors with heterogeneous factor intensities into an otherwise standard two-country stochastic growth model can resolve these anomalies. Endogenous intratemporal trade creates an additional channel for the propagation of productivity shocks across countries, competing with the standard, `resource allocation effect'. Moreover, a country-specific technology shock can induce reallocation of resources both across industries and countries. These reallocations alter the composition of goods produced in countries over the business cycle, and can generate `procyclical' and `countercylical' sectors. An important prediction is that sectoral inputs and outputs tend to be more correlated across countries for more labor-intensive sectors. Predictions of sectoral dynamics is shown to be broadly consistent with the data.

Item Type: Monograph (Working Paper)
Official URL: http://econ.lse.ac.uk/
Additional Information: © 2009 Keyu Jin
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
F - International Economics > F3 - International Finance > F32 - Current Account Adjustment; Short-Term Capital Movements
F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment; Long-Term Capital Movements
Sets: Departments > Economics
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 19 Nov 2009 15:54
URL: http://eprints.lse.ac.uk/25828/

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