International Transmission of the Business Cycle in a Multi-Sectoral Model

Posted: 23 Jul 1998

See all articles by Steve Ambler

Steve Ambler

University of Quebec at Montreal (UQAM) - Centre de recherche sur l'emploi et les fluctuations économiques (CREFÉ)

Emanuela Cardia

University of Montreal - Center for Research and Development in Economics

Christian Zimmermann

Federal Reserve Bank of Saint Louis; IZA Institute of Labor Economics

Date Written: March 1998

Abstract

Multi-country models have not been very successful in replicating important features of the international transmission of business cycles. This paper extends previous work by introducing multiple sectors and traded intermediate inputs. Trade in intermediate goods represents approximately 60% of total trade and could significantly affect the main features of the international transmission of business cycles. In our model, imperfect substitution between domestic and foreign goods leads to cross-hauling in intermediate goods. As well, with more than a sector within each country there may be important inter-sectoral spillover effects that alter the transmission of shocks across countries. We show that these features of the model are important and can generate cross-correlations of output levels, employment and investment that are compatible with the data.

JEL Classification: E32

Suggested Citation

Ambler, Steve and Cardia, Emanuela and Zimmermann, Christian, International Transmission of the Business Cycle in a Multi-Sectoral Model (March 1998). Available at SSRN: https://ssrn.com/abstract=110121

Steve Ambler

University of Quebec at Montreal (UQAM) - Centre de recherche sur l'emploi et les fluctuations économiques (CREFÉ) ( email )

P.O. Box 8888, Downtown Station
Montreal, Quebec H3C 3P8
Canada
514-987-3000 ext. 8372 (Phone)
514-987-8494 (Fax)

Emanuela Cardia (Contact Author)

University of Montreal - Center for Research and Development in Economics ( email )

Montreal, Quebec H3T 1B9
Canada

Christian Zimmermann

Federal Reserve Bank of Saint Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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