What's News in International Business Cycles
Daniele Siena ()
No 1206, 2017 Meeting Papers from Society for Economic Dynamics
The role of news shocks in international business cycles is first evaluated using a structural factor-augmented VAR model (FAVAR). An international FAVAR model is shown to be necessary to recover the correct news shocks in open economies, except the US, without incurring in the ‘non-fundamentalness’ problem. Then, a standard two-country, two-good real business cycle model, featuring news shocks, investment adjustment costs and variable wealth elasticity of the labor supply is used to match and explain the empirical evidence. News shocks are only marginal drivers of international business cycles synchronization.
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:1206
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