International Trade and Business Cycles

Marianne Baxter ()

No 5025, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Virtually all economies experience recurrent fluctuations in economic activity that persist for periods of several quarters to several years. Further, there is a definite tendency for the business cycles of developed countries to move together--there is a world component to business cycles. This paper argues that capital accumulation and international capital flows are central to understanding world trade and business cycles. In particular, fluctuations in net exports and the current account are shown to be dominated by trade in capital goods. The paper develops a two country model of international trade within which capital accumulation and international investment flows play a central role. We explore the channels by which technology shocks and fiscal shocks are transmitted to the domestic and foreign economies, and discuss the extent to which these results are sensitive to individuals' opportunities for international trade in financial assets. Overall, we find that the models capture many of the salient features of international business cycles. However, it has proven consistently difficult to generate sufficient comovement across countries in labor input and investment. The paper concludes with a discussion of fruitful directions for future research.

JEL-codes: F32 F41 (search for similar items in EconPapers)
Date: 1995-02
Note: IFM EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (698)

Published as Baxter, Marianne, 1995. "International trade and business cycles," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 35, pages 1801-1864 Elsevier.
Published as Handbook of International Economics, vol 3 (Dec 1995), North-Holland G. Grossman and K. Rogoff, editors.

Downloads: (external link)
http://www.nber.org/papers/w5025.pdf (application/pdf)

Related works:
Chapter: International trade and business cycles (1995)
Working Paper: International Trade and Business Cycles (1994)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:5025

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w5025

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().