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The cost of adjustment: On comovement between the trade balance and the terms of trade
journal contribution
posted on 2023-05-17, 20:43 authored by Dmitriev, A, Roberts, IThe S-shaped cross-correlation function between the trade balance and the terms of trade has been documented for several countries and time frames. The ability of two-country, two-good business cycle models to reproduce this regularity hinges on the dynamics of capital formation. We cosider the consequences of modeling the adjustment costs for comovement in the trade balance and the terms of trade. Both complete and incomplete market models with capital adjustment costs a la Hayashi (1982) deliver the S-curve seen in the data while the model with investment adjustment costs a la Christiano et al, (2005) does not.
History
Publication title
Economic ModellingVolume
35Issue
5Pagination
689-700ISSN
0264-9993Department/School
TSBEPublisher
Elsevier Science BvPlace of publication
Po Box 211, Amsterdam, Netherlands, 1000 AeRights statement
Copyright 2013 Elsevier B.V.Repository Status
- Restricted