Trade in Intermediate Inputs and Business Cycle Comovement
- (pp. 39-83)
Abstract
Does input trade synchronize business cycles across countries? I incorporate input trade into a dynamic multisector model with many countries, calibrate the model to match bilateral input-output data, and estimate trade-comovement regressions in simulated data. With correlated productivity shocks, the model yields high trade-comovement correlations for goods, but near-zero correlations for services and thus low aggregate correlations. With uncorrelated shocks, input trade generates more comovement in gross output than real value added. Goods comovement is higher when (i) the aggregate trade elasticity is low, (ii) inputs are more substitutable than final goods, and (iii) inputs are substitutable for primary factors.Citation
Johnson, Robert C. 2014. "Trade in Intermediate Inputs and Business Cycle Comovement." American Economic Journal: Macroeconomics, 6 (4): 39-83. DOI: 10.1257/mac.6.4.39Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E32 Business Fluctuations; Cycles
- F11 Neoclassical Models of Trade
- F14 Empirical Studies of Trade
- F43 Economic Growth of Open Economies
- F44 International Business Cycles
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