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The common sources of business cycles in Trans-Pacific countries and the U.S.? A comparison with NAFTA

Uluc Aysun () and Takeshi Yagihashi ()

No 2017-03, Working Papers from University of Central Florida, Department of Economics

Abstract: This paper uses both a nonstructural and a structural analysis to investigate the drivers of the business cycles in the US and 15 Trans-Pacific (TP) countries. Our nonstructural approach, based on a principal component methodology, helps us measure the share of the variation in macroeconomic variables that is explained by factors that are common to both the US and the TP region. We carry out a similar exercise after estimating a large scale, two country dynamic stochastic general equilibrium model that allows for common and correlated shocks across the two regions. The clear and common finding from our analyses is that common shocks explain a substantial amount of macroeconomic variation. Comparison with the NAFTA region, along this dimension, reveals that the US economy is more similar to the TP region than it is with Mexico and Canada.

Keywords: Principal component analysis; DSGE; Bayesian estimation; Trans-Pacific; NAFTA (search for similar items in EconPapers)
JEL-codes: E32 F15 F42 F44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ias and nep-mac
Date: 2017-08
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Journal Article: The common sources of business cycles in Trans‐Pacific countries and the US? A comparison with NAFTA (2019) Downloads
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