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North-South business cycles

Michael Kouparitsas ()

No WP-96-9, Working Paper Series, Macroeconomic Issues from Federal Reserve Bank of Chicago

Abstract: This paper shows that the economic activity of the industrial North and developing South move together - when the North is above its trend, the South tends to be above its trend. We refer to this phenomenon as the \\"North-South business cycle.\\" The paper develops a quantitative general equilibrium model of North-South trade that captures many cyclical features of North-South trade and production data. In particular, the high volatility of North-South terms of trade, and strong comovement of Northern and Southern activity. On the basis of this model we argue that North-South business cycles emerge because shocks originating in the North are transmitted to the South through international goods and assets trade.

Keywords: Business cycles; International trade; Production (Economic theory) (search for similar items in EconPapers)
Date: 1996, Revised 1996
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