Common trade exposure and business cycle comovement

Oscar Avila-Montealegre and Carter Mix

Journal of International Economics, 2024, vol. 152, issue C

Abstract: Bilateral trade is considered a key driver of business-cycle transmission, as countries with higher bilateral trade have more correlated business cycles. We show, however, that when we account for the common trade exposure of a country pair to similar foreign cycles, the effect of bilateral trade on comovement falls sharply. Furthermore, common trade exposure is also a robust predictor of comovement. We conclude that trade is indeed a driver of business-cycle transmission, but often through common exposure to foreign cycles rather than just bilateral linkages. Finally, we consider the implications of these empirical results for the “trade-comovement puzzle.”

Keywords: Trade; Business cycles; Open economy macroeconomics (search for similar items in EconPapers)
JEL-codes: E32 F1 F41 F44 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199624001259
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Common Trade Exposure and Business Cycle Comovement (2020)
Working Paper: Common Trade Exposure and Business Cycle Comovement (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:152:y:2024:i:c:s0022199624001259

DOI: 10.1016/j.jinteco.2024.103998

Access Statistics for this article

Journal of International Economics is currently edited by Martin Uribe and Costas Arkolakis

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().