Modeling News-Driven International Business Cycles
Paul Beaudry (),
Martial Dupaigne () and
Franck Portier ()
No 09-117, TSE Working Papers from Toulouse School of Economics (TSE)
This paper reexamines the question of how to explain business cycle co-movements within and between countries. First, we present two simple theoretically flexible price models to illustrate how and why news shocks can generate robust positive co-movements in economic activity across countries. We also discuss under what conditions the multi-sector version of the model generates appropriate business cycle patterns within countries. Second, we develop a quantitative two-country multi-sector model that is capable of replicating many international business cycle facts. The model is a two-country extension of the closed economy model of Beaudry and Portier , in which there are limited possibilities to reallocate factors between investment and consumption good sectors.
Keywords: business cycles; expectations; international fluctuations (search for similar items in EconPapers)
JEL-codes: E32 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge, nep-mac and nep-opm
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Journal Article: Modeling News-Driven International Business Cycles (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:22242
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