Is There a Quantity Puzzle Within Countries? An Application Using U.S. and Canadian Data

Jean Imbs

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Abstract: Fluctuations in Disposable Income (net of transfers) are more correlated across U.S. States or Canadian Provinces than fluctuations in local Production. Across countries, Consumption plans are less correlated than business cycles, a theoretical anomaly famously labeled a "Quantity Puzzle" by Backus, Kehoe and Kydland (1992). In the aggregate, financially integrated regions tend to have highly synchronized GDP fluctuations, as documented in Imbs (2004b). In contrast, within countries, financial integration is associated with less correlated business cycles, in a way consistent with the standard international real business cycle model. In other words, the Quantity Puzzle pertains to international data, and it stems from the specific impact of capital flows on international output correlations.

Keywords: Financial Integration; International Business Cycles; Risk Sharing; Quantity Puzzle (search for similar items in EconPapers)
Date: 2004
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Published in Canada in the Global Economy - 2004 conference, 2004, Canada. pp.[en ligne]

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00617462

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