Staff Report 146

Back to Publication

International Real Business Cycles

David K. Backus
Patrick J. Kehoe - Consultant
Finn E. Kydland

Published November 1, 1991

Abstract
We ask whether a two-country real business cycle model can account simultaneously for domestic and international aspects of business cycles. With this question in mind, we document a number of discrepancies between theory and data. The most striking discrepancy concerns the correlations of consumption and output across countries. In the data, outputs are generally more highly correlated across countries than consumptions. In the model we see the opposite.


Published In: Journal of Political Economy (Vol 100, Num 4, August 1992, pp. 745-775)
Published In: Open Economy Macroeconomics (Vol. 2, 2006, pp. 154-184)

Download Paper (PDF)