Preference Shocks, International Frictions, and International Business Cycles

Hideaki Hirata

Working Paper from Harvard University OpenScholar

Abstract: AbstractReplicating the degree of cross-country comovements of macroeconomic aggregates, dynamics of prices and quantities of international trade, and the behavior of consumption and labor remains an important challenge in international business cycle literature. This paper incorporates preference shocks into a standard two-country model in which there exist international frictions, such as costs of transportation and restrictions to international asset trade. Country-specific preference shocks that generate fluctuations in each country's consumption and labor solve the puzzles, except for the discrepancy between theory and data regarding international trade variables. The presence or absence of international frictions plays a limited role in solving the puzzles.

Keywords: Comovement; International; Business; Cycles; International; frictions; Preference; shocks (search for similar items in EconPapers)
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Related works:
Journal Article: Preference shocks, international frictions, and international business cycles (2014)
Working Paper: Preference Shocks, International Frictions, and International Business Cycles (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:qsh:wpaper:187751

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