Cyclical Co-movements of Output and Trade in the World Economy

Harris Dellas ()

Canadian Journal of Economics, 1987, vol. 20, issue 4, 855-69

Abstract: An intertemporal maximization general equilibrium model of an industrial block and an LDC resource- rich block is constructed and used to examine the cyclical behavior o f trade flows, investment, and output in the world economy. It is dem onstrated that supply disturbances originating in the raw-materials m arket lead to positive across economic zones and persistent over time comovements in trade, investment, and output if the world real inter est rate moves countercyclically. It is also shown that the sign of t he response of the current account to a supply shock depends on the s ize of the distribution of gains from trade.

Date: 1987
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