Business cycles in a small open economy

Isabel Correia, João C. Neves, Sergio Rebelo*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

132 Scopus citations


This paper discusses a dynamic model that is consistent with the main empirical regularities of economic fluctuations in open economies. While other models in this class have relied on non-separable preferences or finite horizons to generate a realistic consumption volatility, we show that there is a simple class of time separable preferences that is consistent with the cyclical volatilities of the components of the national income accounts identity as well as with the countercyclical character of the balance of trade.

Original languageEnglish (US)
Pages (from-to)1089-1113
Number of pages25
JournalEuropean Economic Review
Issue number6
StatePublished - Jun 1995


  • Business cycles
  • Open economy
  • Trade balance

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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