The Extensive Margin, Sectoral Shares and International Business Cycles / Michael B. Devereux, Viktoria Hnatkovska.

Format:

Book

Author/Creator:

Devereux, Michael B.

Contributor:

National Bureau of Economic Research.

Hnatkovska, Viktoria.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17289.

NBER working paper series no. w17289

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

This paper documents some previously neglected features of sectoral shares at business cycle frequencies in OECD economies. In particular, we find that the nontraded sector share of output is as volatile as aggregate GDP, and that for most countries, the nontraded sector is distinctly countercyclical. While the standard international real business cycle model has difficulty in accounting for these properties of the data, an extended model which allows for sectoral adjustment along both the intensive and extensive margins does a much better job in replicating the volatilities and co-movements in the data. In addition, the model provides a closer match between theory and data with respect to the correlation between relative consumption growth and real exchange rate changes, a key measure of international risk-sharing.

Notes:

Print version record

August 2011.