Heckscher-Ohlin Business Cycles
IGIER Working Paper Series No. 210
33 Pages Posted: 17 Sep 2002
There are 2 versions of this paper
Heckscher-Ohlin Business Cycles
Date Written: March 27, 2002
Abstract
This paper introduces Heckscher-Ohlin trade features into a two-country DSGE model, and studies how productivity shocks propagate through trade in goods. In comparison with standard models, (i) transitory shocks to productivity have permanent effects on country-level aggregate variables; (ii) aggregate productivity shocks have relevant effects on the sectoral allocation of production factors; (iii) the business cycle properties of our model are broadly compatible with the empirical evidence; (iv) under complete asset markets, the international correlation of consumption is lower than that of output.
Keywords: International Trade, Heckscher-Ohlin, Business Cycles, Productivity Shocks
JEL Classification: E32, F11, F32, F41
Suggested Citation: Suggested Citation
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