Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297109 
Authors: 
Year of Publication: 
2023
Series/Report no.: 
LEM Working Paper Series No. 2023/01
Publisher: 
Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM), Pisa
Abstract: 
Business cycles tend to comove across countries. However, standard models that attribute comovement to propagation of exogenous shocks struggle to generate a level of co-movement that is as high as in the data. In this paper, we consider models that produce business cycles endogenously, through some form of non-linear dynamicsâ€'limit cycles or chaos. These models generate stronger comovement, because they combine shock propagation with synchronization of endogenous dynamics. In particular, we study a demand-driven model in which business cycles emerge from strategic complementarities within countries, synchronizing their oscillations through international trade linkages. We develop an eigen-decomposition that explores the interplay between non-linear dynamics, shock propagation and network structure, and use this theory to understand the mechanisms of synchronization. Next, we calibrate the model to data on 24 countries and show that the empirical level of comovement can only be matched by combining endogenous business cycles with exogenous shocks. Our results lend support to the hypothesis that business cycles are at least in part caused by underlying non-linear dynamics.
Subjects: 
Synchronization
Business Cycles
Non-linear dynamics
Networks
JEL: 
C61
E32
F44
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.