Understanding the Cross Country Effects of US Technology Shocks (original) (raw)
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Wilfred Ethier, and an anonymous referee for helpful comments. Any remaining errors are our own. 2 For example, Long and Plosser (1983). Dellas (1986) studies only the planning problem in an analysis of the international transmission of business cycles. His is a two-good, two-country version of the Long and Plosser (1983) model in which both goods are consumed and each country specializes in production. Because both commodities are required inputs to production, a positive transmission is in part an artifact of the technology. Furthermore, the trade account is always in balance in Dellas' model thus precluding the possibility for net capital flows and the analysis of current account issues. 4 The asset markets we model are of the type studied by Lucas (1978) and Brock (1982). Our paper is related to Helpman and Razin (1978), Stulz (1983), and Grinols (1984) who analyze international capital markets and production under uncertainty; however, they do not explicitly address business cycle implications. Also, a related paper by Stockman and Svensson (1985) came to our attention after this paper was completed.
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