Essays on International Macroeconomics and Trade
- Author
- Ko, Paul
- Published
- [University Park, Pennsylvania] : Pennsylvania State University, 2021.
- Physical Description
- 1 electronic document
- Additional Creators
- Eaton, Jonathan
Access Online
- etda.libraries.psu.edu , Connect to this object online.
- Graduate Program
- Restrictions on Access
- Restricted (PSU Only).
- Summary
- This dissertation consists of four chapters. The first chapter introduces the global business cycle synchronization and empirically explores relationships between various shocks and the cross-country business cycle co-movement. The second chapter provides a multi-country, international real business cycle model that incorporates a comprehensive set of shocks that are mentioned in the first chapter. Then, the third chapter connects the model to the data and discusses how various shocks are backed out, by matching various data moments with the endogenous outcomes of the model. Then, the chapter answers the question of which set of shocks primarily affect the synchronization of cross-country business cycles. The fourth chapter explores the implications of the results in the previous chapters to the trade co-movement puzzle. In the first chapter, I empirically show that international business cycles have become highly synchronized across countries in the past three decades. Then, I document that there is a lack of consensus on whether this is due to an increase in the correlation of country-specific shocks or due to increased economic integration in the previous literature. In the second chapter, to understand this empirical phenomenon, I develop a multi-country real business cycle model with international trade that captures several potential explanations: shocks to productivity, demand, leisure, investment, sectoral expenditures, and trade-linkages. The third chapter describes the accounting procedure and the main results. In the first portion of the third chapter, I show a detailed accounting procedure: I match the data exactly with the endogenous outcomes of the model so that shocks fully account for the data. The data moments that I match are GDP, consumption expenditure, labor hours, PPI, CPI, and bilateral trade shares. Then, I calibrate the model to a panel of developed (G7) countries and the rest of the world (ROW). In the second portion of the third chapter, I discuss the main findings. During 1992--2014, I find that trade-linkage shocks, which capture increased economic integration and the volatility of bilateral trade flows, are essential in synchronizing international business cycles. In contrast, correlated country-specific shocks play relatively minor roles. This suggests that trade shocks due to economic integration have been the primary driver of the co-movement of international business cycles. Furthermore, I find that the sources of variation in trade-linkage shocks is predominantly driven by the rest of the world, followed by the United States and Germany -- which shows that the larger the presence of a country in global trade, the larger the impact of the country on international business cycle co-movement. In the fourth chapter, I use my model to address the \textit{trade co-movement puzzle}, which states that international real business cycle models should be predicting a much stronger positive link between trade and cross-country GDP correlations. When I do not account for the trade-linkage shocks in my counterfactuals, I find that the model does not exhibit positive relationship between trade and business cycle co-movement. On the other hand, the other sets of shocks are not sufficient enough to explain the positive relationship between trade and cross-country business cycles. This finding suggests that incorporating the dynamics of trade shocks is crucial when studying the trade co-movement puzzle.
- Other Subject(s)
- Genre(s)
- Dissertation Note
- Ph.D. Pennsylvania State University 2021.
- Technical Details
- The full text of the dissertation is available as an Adobe Acrobat .pdf file ; Adobe Acrobat Reader required to view the file.
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