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CES technology and comovement problem

Author

Listed:
  • Yoonseok Choi

    (Chonnam National University)

Abstract

One of the stylized facts in open economies is countercyclical trade balance. In this paper, I develop and estimate a canonical small open-economy (SOE) model that features the constant elasticity of substitution (CES) production function. The estimation result reveals that the model can deliver the countercyclical trade balance. This paper also finds that the model can produce a negative response of hours to a productivity shock, which is in line with early studies. These results are corroborated by business-cycles statistics based on actual data.

Suggested Citation

  • Yoonseok Choi, 2022. "CES technology and comovement problem," Economics Bulletin, AccessEcon, vol. 42(1), pages 83-89.
    • Handle: RePEc:ebl:ecbull:eb-21-00884
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    File URL: http://www.accessecon.com/Pubs/EB/2022/Volume42/EB-22-V42-I1-P8.pdf
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    More about this item

    Keywords

    CES technology; business cycles; comovement; countercyclical trade balance and hours;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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