2000 Fiscal Year Final Research Report Summary
International Linkages of Business Cycles
| Project/Area Number |
11630004
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
経済理論
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| Research Institution | The University of Tokyo |
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Principal Investigator |
FUKUDA Shin-ichi Faculty of Economics, The University of Tokyo Associate Propessor, 大学院・経済学研究科, 助教授 (00221531)
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| Project Period (FY) |
1999 – 2000
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| Keywords | Business Cycles / Monetary Economics / Sunspot / Business Indicators / 国際的景気循環 |
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| Research Abstract |
The purpose of this project was to investigate whether changes in market psychology can be another source of world business cycles even if agents form rational expectations. The model was based on a two-country monetary model with country-specific cash-in-advance constraints. We assumed that international transmission of economic fluctuations was not large. We then investigated the dynamic property of this two country monetary model and explored the implications of extraneous (non-fundamental) shocks for world business cycles. In the following two-country model, productivity shocks always had strong positive impacts on the domestic output. However, international transmissions of the productivity shocks were small under reasonable parameters. Therefore, unless productivity shocks were highly correlated across countries, it was unlikely that the fundamental value of output in country 1 had a strong correlation with that in country 2. However, when we investigated the dynamic property of this monetary model, we found that there existed stationary sunspot equilibria either when the relative risk aversion of the utility function was large or when positive external effects in production were large. In both cases, stationary sunspot equilibria were more likely outcome for the world aggregate output than for country-specific output. This was because a raise of the expected future domestic output had a positive impact on both domestic and foreign current outputs. However, even the international linkage was small, extraneous uncertainty tended to cause strong synchronization of business cycles.
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