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Sources and Propagation of International Business Cycles: Common Shocks or Transmission?

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  • Canova, Fabio

Abstract

This paper studies the generation and the transmission of international business cycles in a multi-country model with production and consumption interdependencies. Two sources of disturbances are considered and three channels for propagation of shocks are compared. Simulations are performed for symmetric countries and for countries that differ either in preferences, technologies, fiscal policies, wealth or exogenous processes. Production interdependencies determine the charateristics of the propagation of technology shocks while consumption interdependencies are responsible for the transmission of government shocks. Government shocks that are mildly correlated across countries are more successful than technology shocks in reproducing actual data.

Suggested Citation

  • Canova, Fabio, 1993. "Sources and Propagation of International Business Cycles: Common Shocks or Transmission?," CEPR Discussion Papers 781, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:781
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    Citations

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    Cited by:

    1. Van Wincoop, E. & Marrinan, J., 1993. "Public and Private Saving and Investment," Papers 546, Stockholm - International Economic Studies.
    2. Jean IMBS, 1998. "Co-Fluctuations," Cahiers de Recherches Economiques du Département d'économie 9819, Université de Lausanne, Faculté des HEC, Département d’économie.
    3. Kollmann, R., 1996. "The Exchange rate in a Dynamic-Optimizing Current Account Model with Nominal Rigidities : A Quantitative Investigation," Other publications TiSEM c9241581-7b87-4f50-ab98-a, Tilburg University, School of Economics and Management.
    4. Ballabriga, Fernando & Sebastian, Miguel & Valles, Javier, 1999. "European asymmetries," Journal of International Economics, Elsevier, vol. 48(2), pages 233-253, August.
    5. Nikolaos Antonakakis & Ioannis Chatziantoniou & George Filis, 2016. "Business Cycle Spillovers in the European Union: What is the Message Transmitted to the Core?," Manchester School, University of Manchester, vol. 84(4), pages 437-481, July.
    6. Bernard Dumas, 1994. "A Test of the International CAPM Using Business Cycles Indicators as Instrumental Variables," NBER Chapters, in: The Internationalization of Equity Markets, pages 23-58, National Bureau of Economic Research, Inc.
    7. Chance Ngamanya Mwabutwa & Nicola Viegi & Manoel Bittencourt, 2016. "Evolution Of Monetary Policy Transmission Mechanism In Malawi: A Tvp-Var Approach," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 41(1), pages 33-55, March.
    8. Helg, Rodolfo & Manasse, Paolo & Monacelli, Tommaso & Rovelli, Riccardo, 1995. "How much (a)symmetry in Europe? Evidence from industrial sectors," European Economic Review, Elsevier, vol. 39(5), pages 1017-1041, May.
    9. David Backus & Patrick J. Kehoe & Finn E. Kydland, 1993. "International Business Cycles: Theory and Evidence," NBER Working Papers 4493, National Bureau of Economic Research, Inc.
    10. Jean IMBS, 1998. "Fluctuations, Bilateral Trade and the Exchange Rate Regime," Cahiers de Recherches Economiques du Département d'économie 9906, Université de Lausanne, Faculté des HEC, Département d’économie, revised Nov 1998.
    11. Kollmann, Robert, 1996. "Incomplete asset markets and the cross-country consumption correlation puzzle," Journal of Economic Dynamics and Control, Elsevier, vol. 20(5), pages 945-961, May.
    12. Ravn, Morten O., 1997. "International business cycles in theory and in practice," Journal of International Money and Finance, Elsevier, vol. 16(2), pages 255-283, April.

    More about this item

    Keywords

    Business Cycles; Government Expenditure; Interdependence; Technology Shocks; Transmission;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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