Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements

Alan Stockman and Linda Tesar (ltesar@umich.edu)

American Economic Review, 1995, vol. 85, issue 1, 168-85

Abstract: Trade on international financial markets allows people to insure country-specific risk and smooth consumption intertemporally. Equilibrium models of business cycles with trade on global financial markets typically yield international consumption correlations near one and excessive volatility of investment. The authors incorporate nontraded goods in the model and find that the implications for aggregate consumption, investment, and the trade balance are consistent with business-cycle properties of industrialized countries. However, the model driven by technology shocks alone yields counterfactual implications for comovements between consumption and prices at the sectoral level. Taste shocks produce price-quantity relationships more consistent with the data. Copyright 1995 by American Economic Association.

Date: 1995
References: Add references at CitEc
Citations: View citations in EconPapers (917)

Downloads: (external link)
http://links.jstor.org/sici?sici=0002-8282%2819950 ... O%3B2-L&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
Working Paper: Tastes and technology in a two-country model of the business cycle: explaining international co-movements (1991)
Working Paper: Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements (1990)
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:aea:aecrev:v:85:y:1995:i:1:p:168-85

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert (mpa@aeapubs.org).