Heckscher-Ohlin Business Cycles

Alejandro Cunat and Marco Maffezzoli ()

No 210, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: This paper introduces Heckscher-Ohlin trade features into a two-country DSGE model, and studies how productivity shocks propagate through trade in goods. In comparison with standard models, (i) transitory shocks to productivity have permanent effects on country-level aggregate variables; (ii) aggregate productivity shocks have relevant effects on the sectoral allocation of production factors; (iii) the business cycle properties of our model are broadly compatible with the empirical evidence; (iv) under complete asset markets, the international correlation of consumption is lower than that of output.

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Related works:
Journal Article: Hecksher-Ohlin Business Cycles (2004)
Working Paper: Heckscher-Ohlin Business Cycles (2003)
Working Paper: Heckscher-Ohlin Business Cycles (2002)
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