By the same authors

From the same journal

From the same journal

Trade and Synchronization in a Multi-Country Economy

Research output: Contribution to journalArticlepeer-review

Full text download(s)

Published copy (DOI)



Publication details

JournalEuropean economic review
DateAccepted/In press - 17 Jun 2016
DateE-pub ahead of print - 22 Jun 2016
DatePublished (current) - Feb 2017
Number of pages31
Pages (from-to)385–415
Early online date22/06/16
Original languageEnglish


Countries with strong trade linkages have more synchronized business cycles. However, the standard international business cycle framework cannot replicate this finding, uncovering the trade-comovement puzzle. Modeling trade using more sophisticated micro-level assumptions does not help resolve the puzzle. This happens because for a large class of trade models, under certain macro-level conditions, output comovement is determined by the same factor structure. We show that in such models comovement can be explained by three factors: (i) the correlation between each country's TFP; (ii) the correlation between each country's share of expenditure on domestic goods; and (iii) the correlation between each country's TFP and the partner's share of expenditure on domestic goods. An empirical investigation of the link between trade and each of the three factors shows that the trade-comovement relation is in large part explained by the second factor while in the theoretical model this factor reacts counterfactually to changes in trade costs.

Bibliographical note

This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy.

    Research areas

  • Business Cycle Synchronization, International Trade

Discover related content

Find related publications, people, projects, datasets and more using interactive charts.

View graph of relations