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On demand shocks and international business cycle puzzles

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  • Jiang, Mingming

Abstract

This note studies a parsimonious dynamic stochastic general equilibrium model driven by demand shocks to explain two central puzzles in open-economy macroeconomics: the comovement puzzle (Backus et al., 1992) and the Backus–Smith puzzle (Backus and Smith, 1993), while matching a large set of domestic and international business cycle properties observed in the industrialized countries. Features such as non-separable preferences, non-tradable sector, or market incompleteness do not appear to be preconditions for resolving these long-standing puzzles.

Suggested Citation

  • Jiang, Mingming, 2017. "On demand shocks and international business cycle puzzles," Economics Letters, Elsevier, vol. 160(C), pages 29-32.
    • Handle: RePEc:eee:ecolet:v:160:y:2017:i:c:p:29-32
    DOI: 10.1016/j.econlet.2017.08.024
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    References listed on IDEAS

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    More about this item

    Keywords

    Demand shocks; Comovement puzzle; Backus–Smith puzzle; International business cycles;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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