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Sources and propagation of international cycles: Common shocks or transmission?;
Macroeconomic Dynamics Sources and Propagation of Output Cycles: Common Shocks or Transmission
Canova, Fabio; Marrinan, Jane
Universitat Pompeu Fabra. Departament d'Economia i Empresa
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 technology shocks and consumption 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.
Macroeconomics and International Economics
technology and government disturbances
production interdependencies
consumption interdependencies
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