Inter-industry trade and business cycle dynamics

Arbeitspapier

Motivated by the increased importance of trade between industrialized and less-developed countries, we build a DSGE model featuring comparative advantage and inter-industry trade to analyze business cycle dynamics of industrialized countries. We show that productivity shocks lead to shifts in the relative demand of exporting and import-competing sectors, implying an important role for the mobility of workers across sectors. If workers are very mobile, then the aggregate implications of the two-sector model are similar to a one-sector model. If workers are very immobile, then the two-sector model features smaller responses in GDP to domestic shocks but larger responses to foreign shocks, implying larger comovement of GDP across countries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 2041

Classification and Topics

• Classification: Wirtschaft ; Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data) ; Aggregate Factor Income Distribution ; Open Economy Macroeconomics ; International Business Cycles ; Economic Impacts of Globalization: Macroeconomic Impacts
• Subject: international business cycles ; inter-industry trade ; comparative advantage ; wage inequality

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lechthaler, Wolfgang ; Mileva, Mariya
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/141661
• Last update: 10.03.2025, 11:42 AM CET