International business cycles in theory and in practice

This paper investigates whether multi-country international business models can account for international comovements. In the OECD there are substantial positive comovements between many output components, between levels of employment, and between total factor productivities. The standard international business cycle model is not consistent with these comovements. Except for consumption levels, the model implies either negative or very low comovements. This is a robust feature of the theoretical models independently of specific parameter values. One, interesting finding is that a more general specification of the technology shock processes lead to substantial comovements but at the cost of another deficiency. (C) 1997 Elsevier Science Ltd.