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Working Paper
North-South business cycles
This paper shows that the economic activity of the industrial North and developing South move together - when the North is above its trend, the South tends to be above its trend. We refer to this phenomenon as the "North-South business cycle." The paper develops a quantitative general equilibrium model of North-South trade that captures many cyclical features of North-South trade and production data. In particular, the high volatility of North-South terms of trade, and strong comovement of Northern and Southern activity. On the basis of this model we argue that North-South business cycles ...
Working Paper
What can account for fluctuations in the terms of trade?
Fluctuations in the terms of trade the price of a country?s exports relative to the price of its imports are a source of perennial concern to policymakers in developing countries and industrialized nations alike. Terms of trade growth is extremely volatile and can lead to sudden changes in a country?s economic health. This paper seeks to understand the sources of fluctuations in the terms of trade. We decompose a country?s terms of trade volatility into a component stemming from differences in the composition of import baskets and export baskets, which we define as a goods price effect, and a ...
Working Paper
Is the United States an optimum currency area? an empirical analysis of regional business cycles
This paper develops a statistical model to study the business cycles of the eight U.S. BEA regions. By combining unobserved component and VAR techniques I identify not only common and idiosyncratic sources of innovation, but also common and idiosyncratic responses to common shocks. Using this model, I show, at the usual levels of statistical significance, that U.S. regions deviate significantly from Mundell's notion of an optimum currency area. I identify five core regions that have similar sources of disturbances and responses to disturbances (New England, Mideast, Great Lakes, Rocky ...
Journal Article
Evidence of the North--South business cycle
This article examines the fluctuations of two regional economies: the developed, industrial goods exporting countries of the world ("North") and the developing, commodity exporting countries ("South"). The author finds that these very different regions have similar business cycle characteristics and that cyclical fluctuations in one region are positively correlated with fluctuations in other. Preliminary data analysis suggests that cyclical fluctuations in the South are caused by fluctuations that originate in the North.
Newsletter
A new paradigm for the U.S. economy?
Newsletter
Is the U.S. current account sustainable?
This article clearly defines what economists mean by a sustainable current account. The author provides an estimate of the sustainable current account balance for the U.S. economy and assesses the implications of this estimate for the existing current account and level of foreign indebtedness.
Journal Article
Understanding U.S. regional cyclical comovement: How important are spillovers and common shocks?
This article develops a statistical model to study the business cycles of the eight U.S. Bureau of Economic Analysis regions. The author shows that the high level of cyclical comovement among per capita incomes of U.S. regions is the byproduct of common shocks to the regions rather than shocks that originate in one region and subsequently spill over to other regions.
Working Paper
International business cycles under fixed and flexible exchange rate regimes
This paper studies the changing characteristics of post-war international comovement under fixed and flexible exchange regimes. I find that business cycle comovement among all the G7 economies was highest in the universally flexible exchange rate era following the collapse of Bretton Woods (BW) and before the Basle-Nyborg agreement tightened the bands governing the European Exchange Rate Mechanism (ERM). With the exception of a few examples (Canada/US and Germany/France) G7 business cycles were far less synchronized in the universally fixed exchange rate BW era. More recently the ERM period ...
Working Paper
Is there evidence of the new economy in the data?
The popular new economy theory argues that the U.S. economy can now grow at rates much greater than in the past without igniting higher levels of price inflation. At the core of the new economy paradigm is the belief that the U.S. Economy experienced an innovation in the 1990s that raised its so-called constant-inflation trend growth rate. According to its advocates, evidence of the new economy comes from the fact that the U.S. economy experienced relatively strong output growth and low levels of price inflation over the 1990s. This paper evaluates the new economy theory by formally testing ...