liu_03

Emory University
Department of Economics
Working Papers

Title: Production, Trade, and International Comovement *

Number: 03-08

Author: Kevin X.D. Huang and Zheng Liu

Issue Date: May 2003

Abstract: This paper proposes a unified theory to explain two observed patterns of international business cycle co-movements: thecorrelations in aggregate output and in consumption between OECD countries tend to be much higher than those between emergingmarket economies such as Latin America; and within each region, the output correlations are systematically greater than the consumption correlations. The model departs from the standard international business cycle model in that it incorporates a vertical production and trading chain, which is a feature of growing importance in modern world economy. The vertical chain embodies a powerful propagation mechanism that helps generate the observed magnitude and patterns of international correlations following monetary policy shocks.

* Journal of Monetary Economics, forthcoming.

Click on the paper title to download the paper.

You may view the paper in the following formats:

The paper is in PDF format. Click here to download Adobe Acrobat Reader .

Links to
Economics Department Home Page
Emory University Home Page

Title:	Production, Trade, and International Comovement *
Number:	03-08
Author:	Kevin X.D. Huang and Zheng Liu
Issue Date:	May 2003
Abstract:	This paper proposes a unified theory to explain two observed patterns of international business cycle co-movements: thecorrelations in aggregate output and in consumption between OECD countries tend to be much higher than those between emergingmarket economies such as Latin America; and within each region, the output correlations are systematically greater than the consumption correlations. The model departs from the standard international business cycle model in that it incorporates a vertical production and trading chain, which is a feature of growing importance in modern world economy. The vertical chain embodies a powerful propagation mechanism that helps generate the observed magnitude and patterns of international correlations following monetary policy shocks.