The extensive margin, sectoral shares, and international business cycles

Michael Devereux and Viktoria Hnatkovska

Canadian Journal of Economics/Revue canadienne d'économique, 2012, vol. 45, issue 2, 509-534

Abstract: Abstract This paper documents some previously neglected features of sectoral shares at business cycle frequencies in OECD economies. We find that the non‐traded output share is as volatile as aggregate GDP and for most countries is countercyclical. While the standard international real business cycle model has difficulty in accounting for these properties of the data, an extended model that allows for sectoral adjustment along both the intensive and the extensive margins does a much better job of replicating these statistics. The model also matches better the correlation between relative consumption growth and real exchange rate changes, a key measure of international risk‐sharing. Ce texte examine certains aspects négligés de l’évolution des parts des divers secteurs au fil du cycle économique dans les pays de l’OCDE. On découvre que la partie du produit intérieur non‐transigé est tout aussi volatile que le PIB agrégé, et que pour la plupart des pays a un pattern contre‐cyclique. Même si le modèle standard du cycle réel d’affaires au plan international a des difficultés à expliquer ces propriétés des données, un modèle agrandi, qui permet l’ajustement sectoriel à la fois aux marges extensive et intensive, fait un bien meilleur travail. Le modèle s’arrime aussi mieux à la corrèlation entre la croissance relative de la consommation et les taux de change réels ‐ une mesure importante du partage international du risque.

Date: 2012
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https://doi.org/10.1111/j.1540-5982.2012.01707.x

Related works:
Journal Article: The extensive margin, sectoral shares, and international business cycles (2012)
Working Paper: The Extensive Margin, Sectoral Shares and International Business Cycles (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:canjec:v:45:y:2012:i:2:p:509-534

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