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Investment Composition and International Business Cycles

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  • Oviedo, P. Marcelo
  • Singh, Rajesh

Abstract

This paper studies a two country model with economies disaggregated into traded and nontraded sectors and in which investment goods as in practice are produced by combining inputs from all sectors. The model also accounts for nontraded distribution services employed in retailing traded goods to consumers. The results show that the model with multiple input investments outperforms the standard model in which sectoral output also serves as its capital. In particular, it substantially improves (a) the movements of trade balance and relative prices, (b) within country comovements of sectoral and aggregate quantities, and (c) cross-country comovements of output vis-Ã -vis consumption.

Suggested Citation

  • Oviedo, P. Marcelo & Singh, Rajesh, 2012. "Investment Composition and International Business Cycles," Staff General Research Papers Archive 35096, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:35096
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    References listed on IDEAS

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    Cited by:

    1. Oviedo, P. Marcelo & Singh, Rajesh, 2013. "Investment composition and international business cycles," Journal of International Economics, Elsevier, vol. 89(1), pages 79-95.
    2. Simon Bilo, 2018. "The international business cycle as intertemporal coordination failure," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 31(1), pages 27-49, March.

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    More about this item

    JEL classification:

    • F - International Economics
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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