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Trade in Intermediate Inputs and Business Cycle Comovement

Robert Johnson ()

American Economic Journal: Macroeconomics, 2014, vol. 6, issue 4, 39-83

Abstract: Does input trade synchronize business cycles across countries? I incorporate input trade into a dynamic multisector model with many countries, calibrate the model to match bilateral input-output data, and estimate trade-comovement regressions in simulated data. With correlated productivity shocks, the model yields high trade-comovement correlations for goods, but near-zero correlations for services and thus low aggregate correlations. With uncorrelated shocks, input trade generates more comovement in gross output than real value added. Goods comovement is higher when (i) the aggregate trade elasticity is low, (ii) inputs are more substitutable than final goods, and (iii) inputs are substitutable for primary factors.

JEL-codes: E23 E32 F11 F14 F43 F44 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/mac.6.4.39
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Working Paper: Trade in Intermediate Inputs and Business Cycle Comovement (2012) Downloads
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