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On demand shocks and international business cycle puzzles

Mingming Jiang ()

Economics Letters, 2017, vol. 160, issue C, 29-32

Abstract: This note studies a parsimonious dynamic stochastic general equilibrium model driven by demand shocks to explain two central puzzles in open-economy macroeconomics: the comovement puzzle (Backus et al., 1992) and the Backus–Smith puzzle (Backus and Smith, 1993), while matching a large set of domestic and international business cycle properties observed in the industrialized countries. Features such as non-separable preferences, non-tradable sector, or market incompleteness do not appear to be preconditions for resolving these long-standing puzzles.

Keywords: Demand shocks; Comovement puzzle; Backus–Smith puzzle; International business cycles (search for similar items in EconPapers)
JEL-codes: E13 E32 F41 F44 (search for similar items in EconPapers)
Date: 2017
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