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International Trade and the Business Cycle

19 Pages Posted: 2 Apr 2001  

Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management; Cornell University - Department of Economics; Brookings Institution; NBER; IZA Institute of Labor Economics

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Abstract

This paper develops a new empirical framework for analyzing the dynamics of the trade balance in response to different types of macroeconomic shocks. The model provides a synthetic perspective on the conditional correlations between the business cycle and the trade balance that are generated by different shocks and attempts to reconcile these results with unconditional correlations found in the data. The results suggest that, in the post-Bretton Woods period, nominal shocks have been an important determinant of the forecast error variance for fluctuations in the trade balance in G-7 countries.

Keywords: International Trade, Business Cycles, Structural Vector Autoregressions

JEL Classification: F14, E32, F41

Suggested Citation

Prasad, Eswar S., International Trade and the Business Cycle. The Economic Journal, Vol. 109, No. 458, October 1999. Available at SSRN: https://ssrn.com/abstract=265011 or http://dx.doi.org/10.2139/ssrn.265011

Eswar S. Prasad (Contact Author)

Cornell University - Dyson School of Applied Economics and Management ( email )

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HOME PAGE: http://prasad.aem.cornell.edu

Cornell University - Department of Economics ( email )

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Brookings Institution ( email )

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NBER ( email )

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IZA Institute of Labor Economics

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