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

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

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: Multi-country models have not been very successful in replicating important features of the international transmission of business cycles. Standard models predict cross-country correlations of output and consumption which are respectively too low and too high. In this paper, we build a multi-country model of the business cycle with multiple sectors in order to analyze the role of sectoral shocks in the international transmission of the business cycle. We find that a model with multiple sectors generates a higher cross-country correlation of output than standard one-sector models, and a lower cross-country correlation of consumption. In addition, it predicts cross-country correlations of employment and investment that are closer to the data than the standard model. We also analyze the relative effects of multiple sectors, trade in intermediate goods, imperfect substitution between domestic and foreign goods, home preference, capital adjustment costs, and capital depreciation on the international transmission of the business cycle.

Keywords: on economy macroeconomics; business cycles; sectoral shocks (search for similar items in EconPapers)
JEL-codes: E30 E32 (search for similar items in EconPapers)
Date: 2000
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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-Sectoral Model (1998)
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Persistent link: http://EconPapers.repec.org/RePEc:mtl:montde:2000-06

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