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International Transmission of Shocks in a Business-Cycle Model Under Imperfect Competition

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  • Ubide, Angel J.

Abstract

This paper investigates the effects of introducing imperfect competition in an international business-cycle model. We provide some international evidence on markups and analyze the implications of increasing returns to scale and monopolistic competition for the effects and the international transmission of technology and government spending shocks. We also consider exogenous markup fluctuations as a source of shocks and of transmission of business cycles. We show that imperfect competition improves the behavior of a standard model driven by technology shocks, although the behavior of foreign trade variables remains unexplained. We also show that an imperfectly competitive model driven by government shocks can explain the international business cycle at least as well as a model driven by technology shocks.

Suggested Citation

  • Ubide, Angel J., 1999. "International Transmission of Shocks in a Business-Cycle Model Under Imperfect Competition," Macroeconomic Dynamics, Cambridge University Press, vol. 3(3), pages 341-367, September.
    • Handle: RePEc:cup:macdyn:v:3:y:1999:i:03:p:341-367_01
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    Cited by:

    1. Olivero, María Pía, 2010. "Market power in banking, countercyclical margins and the international transmission of business cycles," Journal of International Economics, Elsevier, vol. 80(2), pages 292-301, March.
    2. T.C.Y. Kam & G.C. Lim, 2001. "Interest Rate Smoothing and Inflation-Output Variabilityin a Small Open Economy," Department of Economics - Working Papers Series 817, The University of Melbourne.
    3. Romain Restout, 2008. "Monopolistic Competition and the Dependent Economy Model," Post-Print halshs-00260868, HAL.
    4. Romain Restout, 2008. "Monopolistic Competition and the Dependent Economy Model," Working Papers hal-04140750, HAL.
    5. Cook, David, 2002. "Market entry and international propagation of business cycles," Journal of International Economics, Elsevier, vol. 56(1), pages 155-175, January.
    6. Kam, Timothy, 2007. "Interest-rate smoothing in a two-sector small open economy," Journal of Macroeconomics, Elsevier, vol. 29(2), pages 283-304, June.
    7. Timothy Kam, 2003. "The Value of Interest-rate Smoothing in a Forward-looking Small Open Economy," Economics Discussion / Working Papers 03-12, The University of Western Australia, Department of Economics.

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