Investment composition and international business cycles

P. Marcelo Oviedo and Rajesh Singh

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: This paper studies a two country model with traded and nontraded sectors, in which sector-specific capital goods, as in practice, are produced by combining inputs from all sectors. The model also includes nontraded distribution services employed in retailing traded goods to consumers. The results show that the model with capital goods comprising multisectoral inputs outperforms the standard model in which sectoral output also serves as its capital. In particular, it substantially improves (a) the movements of trade balance and relative prices; (b) within country comovements of sectoral and aggregate quantities; (c) cross-country comovements of output vis-Ã -vis consumption. The results change only marginally when distribution services are removed from the model.

Keywords: International business cycles; Quantity anomaly; Distribution costs; Cross-country correlations (search for similar items in EconPapers)
JEL-codes: F32 F34 F41 (search for similar items in EconPapers)
Date: 2013-01-05
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Citations: View citations in EconPapers (4)

Published in Journal of International Economics, January 2013, vol. 89 no. 1, pp. 79-95

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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:35585

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