Business Cycles Through International Shocks: A Structural Investigation
11 Pages Posted: 26 May 2010 Last revised: 19 Dec 2011
Date Written: December 18, 2011
Abstract
This paper investigates the sources of output volatility by decomposing the international shocks into finance and trade shocks. Through structural Bayesian estimations of an open-economy DSGE model on 16 countries, on average, it is found that international shocks explain around 70% of output fluctuations. Across countries, the decomposition of international shocks shift toward trade shocks as the price stickiness falls, as steady-state real interest rate increases, as the weight given to output in the Taylor rule increases, or as the interest-rate smoothing increases.
Keywords: Cycles, Monetary Policy, International Trade Costs
JEL Classification: E32, E52, F41
Suggested Citation: Suggested Citation
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