Preference shocks, international frictions, and international business cycles

Hideaki Hirata ()

Journal of Asian Economics, 2014, vol. 34, issue C, 92-104

Abstract: Replicating the degree of cross-country comovements of macroeconomic aggregates, dynamics of prices and quantities of international trade, and the behavior of consumption and labor remains an important challenge in international business cycle literature. This paper incorporates preference shocks into a standard two-country model in which there exist international frictions, such as costs of transportation and restrictions to international asset trade. Country-specific preference shocks that generate fluctuations in each country's consumption and labor solve the puzzles, except for the discrepancy between theory and data regarding international trade variables. The presence or absence of international frictions plays a limited role in solving the puzzles.

Keywords: International business cycles; Preference shocks; International frictions; Comovement (search for similar items in EconPapers)
JEL-codes: E3 F4 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Preference Shocks, International Frictions, and International Business Cycles (2014)
Working Paper: Preference Shocks, International Frictions, and International Business Cycles
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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:34:y:2014:i:c:p:92-104

DOI: 10.1016/j.asieco.2014.07.002

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