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Discussion Paper Details

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Title: Business Cycles in a Small Open Economy

Author(s): Isabel Correia, Joao C Neves and Sérgio Rebelo

Publication Date: July 1994

Keyword(s): Business Cycles, Open Economy and Trade Balance

Programme Area(s): International Macroeconomics

Abstract: This paper discusses a dynamic model that is consistent with the main empirical regularities of economic fluctuations in open economies. While other models in this class have relied on non-separable preferences or finite horizons to generate a realistic consumption volatility, we show that there is a simple class of time separable preferences that is consistent with the cyclical volatilities of the components of the national income accounts identity as well as with the countercyclical character of the balance of trade.

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Bibliographic Reference

Correia, I, Neves, J and Rebelo, S. 1994. 'Business Cycles in a Small Open Economy'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=996