Technology Shocks: Novel Implications for International Business Cycles

Andrea Raffo

No 511, 2008 Meeting Papers from Society for Economic Dynamics

Abstract: This paper studies the effects of neutral and investment-specific technology shocks in a standard international business cycle model. When investment-specific shocks explain a large fraction of fluctuations, as recently suggested by the empirical literature, our theoretical framework can account quantitatively for 1) the negative correlation between real exchange rates and relative consumption (Backus-Smith puzzle) 2) the negative correlation between terms of trade and relative output and 3) the large volatility of the terms of trade and trade flows. The main insight of this exercise is that investment-specific technology shocks in a open economy generate effects similar to taste-shocks: they raise production and domestic prices together with an appreciation of the terms of trade and large inflows of foreign goods. Our findings entail a reconsideration of the international transmission of technology shocks: the reponse of international prices depends critically on the type of technology shocks.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2008/paper_511.pdf (application/pdf)

Related works:
Working Paper: Technology Shocks: Novel Implications for International Business Cycles (2010)
Working Paper: Technology shocks: novel implications for international business cycles (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed008:511

Access Statistics for this paper

More papers in 2008 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().