The Extensive Margin, Sectoral Shares and International Business Cycles

Michael Devereux and Viktoria Hnatkovska ()

No 17289, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper documents some previously neglected features of sectoral shares at business cycle frequencies in OECD economies. In particular, we find that the nontraded sector share of output is as volatile as aggregate GDP, and that for most countries, the nontraded sector is distinctly countercyclical. While the standard international real business cycle model has difficulty in accounting for these properties of the data, an extended model which allows for sectoral adjustment along both the intensive and extensive margins does a much better job in replicating the volatilities and co-movements in the data. In addition, the model provides a closer match between theory and data with respect to the correlation between relative consumption growth and real exchange rate changes, a key measure of international risk-sharing.

JEL-codes: F3 F4 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge and nep-opm
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as Michael B. Devereux & Viktoria Hnatkovska, 2012. "The extensive margin, sectoral shares, and international business cycles," Canadian Journal of Economics, Canadian Economics Association, vol. 45(2), pages 509-534, May.
Published as Michael B. Devereux & Viktoria Hnatkovska, 2012. "The extensive margin, sectoral shares, and international business cycles," Canadian Journal of Economics/Revue canadienne d'économique, vol 45(2), pages 509-534.

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Journal Article: The extensive margin, sectoral shares, and international business cycles (2012)
Journal Article: The extensive margin, sectoral shares, and international business cycles (2012)
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