Staggered Wages, Financial Frictions, and the International Comovement Problem

Yossi Yakhin (yossi.yakhin@boi.org.il)

Review of Economic Dynamics, 2007, vol. 10, issue 1, 148-171

Abstract: Standard international real business cycle models often generate negative cross-country correlations in labor and investment. The data, however, display positive correlations. This paper studies the effect of real wage rigidity and financial frictions on international comovement. We find that staggered wages mainly improve the cross-country correlation of labor, while financial frictions improve investment comovement. However, each friction alone cannot account for the magnitude of international correlations of either variable. When the two imperfections are introduced together, the effect of each friction endogenously reinforces the other and the model generates realistic correlations in both variables. (Copyright: Elsevier)

Keywords: International real business cycles; Staggered wages; Comovement; Incomplete financial markets (search for similar items in EconPapers)
JEL-codes: E32 F20 F41 (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://dx.doi.org/10.1016/j.red.2006.09.001
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See http://www.sciencedirect.com/ for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:issued:06-90

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/
red@elsevier.com

DOI: 10.1016/j.red.2006.09.001

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann (chuichuiche@gmail.com).