International Trade and the Business Cycle

25 Pages Posted: 13 Feb 2006  

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

Multiple version iconThere are 2 versions of this paper

Date Written: April 1999

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 balances of the Group of Seven countries.

Keywords: Trade balance, business cycles, vector autoregressions

JEL Classification: F14, E32, F41

Suggested Citation

Prasad, Eswar S., International Trade and the Business Cycle (April 1999). IMF Working Paper, Vol. , pp. 1-25, 1999. Available at SSRN: https://ssrn.com/abstract=880583

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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