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| Author: | Phillips, K. L. |
| Title: | A two-country model of stochastic output with changes in regime |
| Journal: | Journal of International Economics
1991 : AUG, VOL. 31:1-2, p. 121-142 |
| Index terms: | BUSINESS CYCLES DIFFUSION INTERNATIONAL STOCHASTIC PROCESSES MARKOV CHAINS |
| Language: | eng |
| Abstract: | The transmission of business cycles between countries is evaluated. Evidence is presented that world-wide shocks dominate any transmission of business cycles. Different types of Markov-shifting processes are examined. The results will help in constructing two-country business cycle models. Empirical evidence is based on quarterly observations of seasonally adjusted industrial production for Canada, the United Kingdom, the USA and Germany. It appears that while recessions and booms do seem to occur simultaneously across countries, they are attributable to world-wide shocks and not the result of business cycle transmission from one country to another. It is stressed that the results of this study apply only to the four countries considered. |
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