Government Spending and the International Business Cycle

Maurice Roche

Canadian Journal of Economics, 1996, vol. 29, issue 4, 865-84

Abstract: In this paper, the author develops a stochastic general equilibrium model of the world economy. It differs from previous multicountry models in the introduction of the government sector. The author assumes that countries produce a nonspecialized traded good and that households derive utility from the consumption of private and public goods and services. This simple modification has a potential explanation for the low cross-country correlations in private consumption and output and the countercyclical trade balances that are observed empirically.

Date: 1996
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