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- Title
Vertical Specialization and International Business Cycle Synchronization.
- Authors
Arkolakis, Costas; Ramanarayanan, Ananth
- Abstract
We explore the impact of vertical specialization—trade in goods across multiple stages of production—on the relationship between trade and business cycle synchronization across countries. We develop an international business cycle model in which the degree of vertical specialization varies with trade barriers. With perfect competition, we show analytically that fluctuations in measured total factor productivity are not linked across countries through trade. In numerical simulations, we find little dependence of business cycle synchronization on trade intensity. An extension of the model to allow for imperfect competition has the potential to resolve these shortcomings.
- Subjects
BUSINESS cycles; ECONOMIC activity; BUSINESS conditions; NUMERICAL analysis; PERFECT competition
- Publication
Scandinavian Journal of Economics, 2009, Vol 111, Issue 4, p655
- ISSN
0347-0520
- Publication type
Article
- DOI
10.1111/j.1467-9442.2009.01580.x