The International Transmission of Real Business Cycles

Frédérique Bec

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Abstract: This paper develops a simple one-sector, two-country equilibrium model which accounts for the relatively low cross-country consumption correlations without damaging the areas of success of existing models. This improvement arises from the modification of the consumption index in order to add public consumption to private consumption in the preferences of the agents, which allows shocks to government purchases to alter the marginal utility of consumption. This model explains quite well both the high correlation between saving and investment and the counter-cyclically of net exports. However, only a strong cross-correlation of home and foreign technology shocks enables the model to mimic the crosscountry correlation of output.

Keywords: Macroeconomic volatility; International business cycle transmission (search for similar items in EconPapers)
Date: 1995
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Published in Pierre-Yves Hénin. Advances in Business Cycle Research: With Application to the French and US Economies, pp.143-172, 1995, 978-3-642-57817-5. ⟨10.1007/978-3-642-57817-5_5⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01319126

DOI: 10.1007/978-3-642-57817-5_5

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