Sources and Propagation of International Cycles: Common Shocks or Transmission?
Posted: 10 Mar 1997
Date Written: November 1996
Abstract
This paper studies the generation and transmission of international cycles in a multi-country model with production and consumption interdependencies. Two sources of disturbance are considered, and three channels of propagation are compared. In the short run the contemporaneous correlation of disturbances determines the main features of the transmission. In the medium run production interdependencies account for the transmission of government shocks. Technology disturbances, which are mildly correlated across countries, are more successful than government expenditure disturbances in reproducing actual data. The model also accounts for the low cross-country consumption correlations observed in the data.
JEL Classification: C68, E32, F11
Suggested Citation: Suggested Citation