International Transmission of the Business Cycle in a Multi-Sectoral Model

Steven Ambler (), Emanuela Cardia () and Christian Zimmermann ()

No 60, Cahiers de recherche CREFE / CREFE Working Papers from CREFE, Université du Québec à Montréal

Abstract: Multi-country models have not been very successful in replicating important features of the international transmission of business cycles. This paper extends previous work by introducing multiple sectors and traded intermediate inputs. Trade in intermediate goods represents approximately 60% of total trade and could significantly affect the main features of the international transmission of business cycles. In our model, imperfect substitution between domestic and foreign goods leads to cross-hauling in intermediate goods. As well, with more than a sector within each country there may be important inter-sectoral spillover effects that alter the transmission of shocks across countries. We show that these features of the model are important and can generate cross-correlations of output levels, employment and investment that are compatible with the data.

Les modèles multi-pays n'ont pas réussi à reproduire les faits saillants de la transmission internationale du cycle économique. Dans ce texte nous incorporons des secteurs multiples et le commerce international des biens intermédiaires dans un modèle de la transmission du cycle. Les flux de biens intermédiaires constituent 60% du commerce international et pourraient avoir un impact important sur la transmission internationale des cycles. Dans le modèle, la substitution imparfaite entre les biens domestiques et étrangers mène à l'exportation et à l'importation simultanées des mêmes types de bien. Puisqu'il y a plus d'un secteur dans chaque pays, il y a des effets de débordement intersectoriels et internationaux qui peuvent modifier la transmission de chocs entre pays. Nous montrons que ces aspects de notre modèle ont des conséquences importantes et que le modèle peut engendrer des corrélations croisées des niveaux d'output, d'investissement et de consommation qui sont compatibles avec les données.

Keywords: Open economy macroeconomics; Business cycles; Intermediate goods; Sectoral shocks (search for similar items in EconPapers)
JEL-codes: E32 F41 D57 (search for similar items in EconPapers)
Date: 1998-03
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Related works:
Journal Article: International transmission of the business cycle in a multi-sector model (2002)
Working Paper: International Transmission of the Business Cycle in a Multi-Sector Model (2000)
Working Paper: International Transmission of the Business Cycle in a Multi-Sector Model (2000)
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