International Trade and the Business Cycle

April 1, 1999

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Format: Chicago

Eswar S Prasad. International Trade and the Business Cycle, (USA: International Monetary Fund, 1999) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Business cycles, Economic growth, Economic theory, Exchange rates, Foreign exchange, International trade, Real exchange rates, Supply shocks, Trade balance

Keywords: Business cycles, Demand shocks to the forecast error variance, Exchange rate depreciation, Exchange rate fluctuation, Exchange rates, Ratio of the trade balance, Real exchange rates, Response to a supply shock, Supply and demand, Supply and demand demand shock, Supply shocks, Time series, Trade balance, Trade balance response, Trade variable, Vector autoregressions, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/056
Stock No:

WPIEA0561999
ISBN:

9781451847680
ISSN:

1018-5941

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