Bilateral Linkages and the International Transmission of Business Cycles

Lance Kent ()

No 149, Working Papers from Economics Department, William & Mary

Abstract: This paper estimates the contributions of trade and financial linkages to the directed graph that describes the international propagation of macroeconomic shocks at the business cycle frequency. Among the findings: import and export intensity are asymmetrically associated with shock transmission; bilateral portfolio equity holdings are associated with comovement within the quarter but not between quarters; the import of goods used for capital formation is strongly associated with shock transmission both within and between quarters. The novel stylized facts refine the “trade-comovement” puzzle into the “trade-correlation” and the “trade-transmission puzzles, both of which are challenges for standard international business cycle models.

Keywords: International Business Cycles; International Panel VAR; Trade and Financial Integration; Comovement; International Real Business Cycle Model. (search for similar items in EconPapers)
JEL-codes: C33 E32 F21 F41 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2014-03-15
New Economics Papers: this item is included in nep-int and nep-opm
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