Business cycles in a small open economy

Isabel Correia; João C. Neves; Sergio Rebelo

doi:10.1016/0014-2921(94)00105-9

Business cycles in a small open economy

Isabel Correia, João C. Neves, Sergio Rebelo^*

^*Corresponding author for this work

Finance

Research output: Contribution to journal › Article › peer-review

141 Scopus citations

Abstract

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 language	English (US)
Pages (from-to)	1089-1113
Number of pages	25
Journal	European Economic Review
Volume	39
Issue number	6
DOIs	https://doi.org/10.1016/0014-2921(94)00105-9
State	Published - Jun 1995

Funding

We benefited greatly from the comments and suggestionso f Marianne Baxter, Jeremy Greenwood, Robert King, Finn Kydland, Enrique Mendoza, Jose Scheinkman, and an anonymous referee, as well as from feedback provided by participantsa t the Journal of Economic Dynamics and Control Conference held in Capri, and at the European Economic Association Meeting held in Cambridge. Rebel0 gratefully acknowledgesf inancial support from the NBER’s Olin Fellowship. The usual disclaimer applies.

Keywords

Business cycles
Open economy
Trade balance

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/0014-2921(94)00105-9

Cite this

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title = "Business cycles in a small open economy",

abstract = "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.",

keywords = "Business cycles, Open economy, Trade balance",

author = "Isabel Correia and Neves, \{Jo{\~a}o C.\} and Sergio Rebelo",

note = "Funding Information: We benefited greatly from the comments and suggestionso f Marianne Baxter, Jeremy Greenwood, Robert King, Finn Kydland, Enrique Mendoza, Jose Scheinkman, and an anonymous referee, as well as from feedback provided by participantsa t the Journal of Economic Dynamics and Control Conference held in Capri, and at the European Economic Association Meeting held in Cambridge. Rebel0 gratefully acknowledgesf inancial support from the NBER{\textquoteright}s Olin Fellowship. The usual disclaimer applies.",

year = "1995",

month = jun,

doi = "10.1016/0014-2921(94)00105-9",

language = "English (US)",

volume = "39",

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T1 - Business cycles in a small open economy

AU - Correia, Isabel

AU - Neves, João C.

AU - Rebelo, Sergio

N1 - Funding Information: We benefited greatly from the comments and suggestionso f Marianne Baxter, Jeremy Greenwood, Robert King, Finn Kydland, Enrique Mendoza, Jose Scheinkman, and an anonymous referee, as well as from feedback provided by participantsa t the Journal of Economic Dynamics and Control Conference held in Capri, and at the European Economic Association Meeting held in Cambridge. Rebel0 gratefully acknowledgesf inancial support from the NBER’s Olin Fellowship. The usual disclaimer applies.

PY - 1995/6

Y1 - 1995/6

N2 - 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.

AB - 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.

KW - Business cycles

KW - Open economy

KW - Trade balance

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JO - European Economic Review

JF - European Economic Review

IS - 6

ER -

Business cycles in a small open economy

Abstract

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