Business cycle asymmetry via occasionally binding international borrowing constraints

Shuyun May Li and Scott Dressler ()

Journal of Macroeconomics, 2011, vol. 33, issue 1, 33-41

Abstract: This paper illustrates how occasionally binding credit constraints can be quantitatively important to delivering business-cycle asymmetries. An empirical exercise suggests that countries display some business-cycles asymmetries, and an open-economy real business-cycle model is assessed where an international borrowing constraint binds occasionally. In the model, downward movements with a slack constraint are sharper and quicker than upward movements with a binding constraint, and this can deliver asymmetry over the business cycle. The model is calibrated to Canadian data and suggests that a necessary ingredient for asymmetry is a high initial level of foreign debt.

Keywords: Business; cycle; asymmetry; Deepness; Steepness; Small; open; economy; International; borrowing; constraints (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:33:y:2011:i:1:p:33-41

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