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The cost of adjustment: On comovement between the trade balance and the terms of trade

Citation

Dmitriev, A and Roberts, I, The cost of adjustment: On comovement between the trade balance and the terms of trade, Economic Modelling, 35, (5) pp. 689-700. ISSN 0264-9993 (2013) [Refereed Article]

Copyright Statement

Copyright 2013 Elsevier B.V.

DOI: doi:10.1016/j.econmod.2013.08.027

Abstract

The 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.

Item Details

Item Type:Refereed Article
Keywords:capital adjustment costs, investment adjustment costs, S-curve, international business cycles
Research Division:Economics
Research Group:Applied Economics
Research Field:Macroeconomics (incl. Monetary and Fiscal Theory)
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Monetary Policy
Author:Dmitriev, A (Dr Alexandre Dmitriev)
ID Code:87606
Year Published:2013
Web of Science® Times Cited:1
Deposited By:Economics and Finance
Deposited On:2013-11-26
Last Modified:2017-01-11
Downloads:106 View Download Statistics

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