DP781 Sources and Propagation of International Business Cycles: Common Shocks or Transmission?

Author(s):	Fabio Canova
Publication Date:	June 1993
Keyword(s):	Business Cycles, Government Expenditure, Interdependence, Technology Shocks, Transmission
JEL(s):	C68, E32, F11
Programme Areas:	International Macroeconomics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=781

This paper studies the generation and the transmission of international business cycles in a multi-country model with production and consumption interdependencies. Two sources of disturbances are considered and three channels for propagation of shocks are compared. Simulations are performed for symmetric countries and for countries that differ either in preferences, technologies, fiscal policies, wealth or exogenous processes. Production interdependencies determine the charateristics of the propagation of technology shocks while consumption interdependencies are responsible for the transmission of government shocks. Government shocks that are mildly correlated across countries are more successful than technology shocks in reproducing actual data.