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Trade in Capital Goods and Investment-Specific Technical Change

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Author Info
Martin Boileau () (University of Colorado at Boulder and Center for Research on Economic Fluctuations and Employment, UQAM)

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Abstract

This paper studies the role of trade in capital goods and investment-specific technical change in the determination of the cross-country correlation of output and the volatility of the terms of trade. The cross-country correlation of output for G7 countries ranges from 0.42 to 0.85 and the relative volatility of the terms of trade ranges from 1.24 to 6.06. The standard model with total factor productivity change and trade in final goods only generates a cross-country correlation of 0.05 and a volatility of 0.68. Models that allow trade in capital goods and investment-specific technical change produce a cross-country correlation of at least 0.47 and a volatility of at least 3.86.

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Publisher Info
Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 68.

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Length: 31 pages
Date of creation: Jan 1999
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Handle: RePEc:cre:crefwp:68

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Related research
Keywords: International real business cycles;

Other versions of this item:

Find related papers by JEL classification:
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1993. "International Business Cycles: Theory and Evidence," Working Papers 93-21, New York University, Leonard N. Stern School of Business, Department of Economics.
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  2. David K. Backus & Mario J. Crucini, 1998. "Oil Prices and the Terms of Trade," NBER Working Papers 6697, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, vol. 84(1), pages 84-103, March. [Downloadable!] (restricted)
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  4. Arvanitis, Athanasios V & Mikkola, Anne, 1996. "Asset-Market Structure and International Trade Dynamics," American Economic Review, American Economic Association, vol. 86(2), pages 67-70, May. [Downloadable!] (restricted)
  5. Marianne Baxter, 1995. "International Trade and Business Cycles," NBER Working Papers 5025, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1998. "The Role of Investment-Specific Technological Change in the Business Cycle," RCER Working Papers 449, University of Rochester - Center for Economic Research (RCER).
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  7. Canova, Fabio & Marrinan, Jane, 1998. "Sources and propagation of international output cycles: Common shocks or transmission?," Journal of International Economics, Elsevier, vol. 46(1), pages 133-166, October. [Downloadable!] (restricted)
  8. Greenwood, Jeremy & Hercowitz, Zvi & Krusell, Per, 1997. "Long-Run Implications of Investment-Specific Technological Change," American Economic Review, American Economic Association, vol. 87(3), pages 342-62, June. [Downloadable!] (restricted)
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  9. Canova, Fabio & Dellas, Harris, 1993. "Trade interdependence and the international business cycle," Journal of International Economics, Elsevier, vol. 34(1-2), pages 23-47, February. [Downloadable!] (restricted)
  10. V.V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1998. "Can sticky price models generate volatile and persistent real exchange rates?," Staff Report 223, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  11. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-75, August. [Downloadable!] (restricted)
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  12. 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. [Downloadable!] (restricted)
  13. Boileau, Martin, 1996. "Growth and the International Transmission of Business Cycles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 737-56, November.
  14. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christopher Erceg & Luca Guerrieri & Christopher Gust, 2006. "Trade adjustment and the composition of trade," International Finance Discussion Papers 859, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  2. Millan L. B. Mulraine, 2005. "Investment-Specific Technology Shocks in a Small Open Economy," Macroeconomics 0506009, EconWPA. [Downloadable!]
    Other versions:
  3. Mulraine, Millan L. B., 2006. "Real Exchange Rate Dynamics With Endogenous Distribution Costs," MPRA Paper 9, University Library of Munich, Germany. [Downloadable!]
  4. Parantap Basu & Christoph Thoenissen, 2009. " International business cycles and the relative price of investment goods," CDMA Working Paper Series 0905, Centre for Dynamic Macroeconomic Analysis. [Downloadable!]
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