The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

International Real Business Cycles

  • Mario J. Crucini
Reference work entry


International business cycle research seeks to summarize the statistical properties of worldwide economic fluctuations and model them as the outcome of purposeful decisions by individuals, firms and policymakers who react to changes in their economic environment and an uncertain future. The focus is on identifying the sources of fluctuations and how interactions of economic actors play out in terms of cyclical movements in variables such as gross domestic product. The term ‘real’ indicates a sub-area of the research programme that focuses on non-monetary dimensions such as changes in productivity and fiscal policy rather than in the money supply and monetary policy.


Adjustment costs Armington aggregator Asset market structure Business cycle measurement Business cycles Capital accumulation Capital utilization Consumption function Consumption smoothing Current account Euler equations Expectations Factor mobility Imperfect competition Incomplete markets International finance International real business cycles International taxation International trade Intertemporal substitution effect Law of large numbers Law of one price Nominal exchange rates Open economy analysis Permanent-income hypothesis Purchasing power parity Rational expectations Real business cycles Real exchange rates Risk sharing State space models Sticky prices Terms of trade Total factor productivity Trade costs Wealth World business cycle 

JEL Classifications

This is a preview of subscription content, log in to check access.



The author is grateful to Ben Eden for comments and to Hakan Yilmazkuday for excellent research assistance


  1. Ambler, S., E. Cardia, and C. Zimmerman. 2002. International transmission of the business cycle in a multi-sector model. European Economic Review 46: 273–300.CrossRefGoogle Scholar
  2. Ambler, S., E. Cardia, and C. Zimmermann. 2004. International business cycles: What are the facts? Journal of Monetary Economics 51: 257–276.CrossRefGoogle Scholar
  3. Arvanitis, A.V., and A. Mikkola. 1996. Asset-market structure and international trade dynamics. American Economic Review 86: 67–70.Google Scholar
  4. Backus, D.K., and M.J. Crucini. 2000. Oil prices and the terms of trade. Journal of International Economics 50: 185–213.CrossRefGoogle Scholar
  5. Backus, D.K., P. Kehoe, and F. Kydland. 1992. International real business cycles. Journal of Political Economy 100: 745–775.CrossRefGoogle Scholar
  6. Backus, D.K., P. Kehoe, and F. Kydland. 1994. Dynamics of the trade balance and the terms of trade: The J-curve. American Economic Review 84: 84–103.Google Scholar
  7. Baxter, M., and M.J. Crucini. 1993. Explaining saving-investment correlations. American Economic Review 83: 416–436.Google Scholar
  8. Baxter, M., and M.J. Crucini. 1995. Business cycles and the asset structure of foreign trade. International Economic Review 36: 821–854.CrossRefGoogle Scholar
  9. Baxter, M., and D. Farr. 2005. Variable capital utilization and international business cycles. Journal of International Economics 65: 335–347.CrossRefGoogle Scholar
  10. Bergin, P.R., and R.C. Feenstra. 2000. Staggered price setting, translog preferences, and endogenous persistence. Journal of Monetary Economics 45: 657–680.CrossRefGoogle Scholar
  11. Betts, C., and M. Devereux. 2000. Exchange rate dynamics in a model of pricing to market. Journal of International Economics 50: 215–244.CrossRefGoogle Scholar
  12. Beveridge, S., and C. Nelson. 1981. A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle. Journal of Monetary Economics 7: 151–174.CrossRefGoogle Scholar
  13. Burns, A., and W. Mitchell. 1946. Measuring business cycles. New York: NBER.Google Scholar
  14. Burstein, A.T., J.C. Neves, and S. Rebelo. 2003. Distribution costs and real exchange rate dynamics during exchange-rate based stabilizations. Journal of Monetary Economics 50: 1189–1214.CrossRefGoogle Scholar
  15. Canova, F., and A.J. Ubide. 1998. International business cycles, financial markets and household production. Journal of Economic Dynamics and Control 22: 545–572.CrossRefGoogle Scholar
  16. Chari, V.V., P.J. Kehoe, and E.R. McGrattan. 2002. Can sticky price models generate volatile and persistent real exchange rates? Review of Economic Studies 69: 533–563.CrossRefGoogle Scholar
  17. Cochrane, J.H. 1994. Permanent and transitory components of GNP and stock prices. Quarterly Journal of Economics 109: 241–265.CrossRefGoogle Scholar
  18. Corsetti, G., Dedola, L. and Leduc, S. 2005. International risk-sharing and the transmission of productivity shocks. International Finance Discussion Paper No. 826. Board of Governors of the Federal Reserve Board.Google Scholar
  19. Crucini, M.J., and M. Shintani. 2006. International comovement: Is theory ahead of business cycle measurement? Mimeo: Vanderbilt University.Google Scholar
  20. Crucini, M.J., C.I. Telmer, and M. Zachariadis. 2005. Understanding European real exchange rates. American Economic Review 95: 724–738.CrossRefGoogle Scholar
  21. Eaton, J., and S. Kortum. 2002. Technology, geography, and trade. Econometrica 70: 1741–1779.CrossRefGoogle Scholar
  22. Feeney, J. 1994. Goods and asset market interdependence in a risky world. International Economic Review 35: 551–563.CrossRefGoogle Scholar
  23. Feldstein, M., and C.I. Horioka. 1980. Domestic saving and international capital flows. Economic Journal 90: 314–329.CrossRefGoogle Scholar
  24. Friedman, M. 1957. A theory of the consumption function. Princeton: Princeton University Press.Google Scholar
  25. Glick, R., and K. Rogoff. 1995. Global versus country-specific productivity shocks and the current account. Journal of Monetary Economics 35: 159–192.CrossRefGoogle Scholar
  26. Hodrick, R., and E.C. Prescott. 1997. Post-war U.S. business cycles: An empirical investigation. Journal of Money. Credit and Banking 29: 1–16.CrossRefGoogle Scholar
  27. Imbs, J. 1994. Technology, growth and the business cycle. Journal of Monetary Economics 44: 65–80.CrossRefGoogle Scholar
  28. Kehoe, P.J., and F. Perri. 2002. International business cycles with endogenous incomplete markets. Econometrica 70: 907–928.CrossRefGoogle Scholar
  29. King, R.G., C.I. Plosser, and S. Rebelo. 1988. Production, growth, and business cycles I: The basic neoclassical model. Journal of Monetary Economics 21: 195–232.CrossRefGoogle Scholar
  30. Kollman, R. 1998. U.S. trade balance dynamics: The role of fiscal policy and productivity shocks and of financial market linkages. Journal of International Money and Finance 17: 637–669.CrossRefGoogle Scholar
  31. Kose, A. 2002. Explaining business cycles in small open economies: How much do world prices matter? Journal of International Economics 56: 299–327.CrossRefGoogle Scholar
  32. Kose, A., C. Otrok, and C. Whiteman. 2003. International business cycles: World, region, and country-specific factors. American Economic Review 93: 1216–1239.CrossRefGoogle Scholar
  33. Kouparitsas, M. 1996. North–South business cycles. Working Paper No. 96–9, Federal reserve bank of chicago.Google Scholar
  34. Kydland, F.E., and E.C. Prescott. 1982. Time to build and aggregate fluctuations. Econometrica 50: 1345–1370.CrossRefGoogle Scholar
  35. Long, J., and C.I. Plosser. 1983. Real business cycles. Journal of Political Economy 91: 39–69.CrossRefGoogle Scholar
  36. Mendoza, E. 1991. Real business cycles in a small open economy. American Economic Review 81: 797–818.Google Scholar
  37. Mendoza, E., A. Razin, and L. Tesar. 1994. Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption. Journal of Monetary Economics 34: 297–323.CrossRefGoogle Scholar
  38. Mendoza, E., and L. Tesar. 1998. The international ramifications of tax reforms: Supply-side economics in a global economy. American Economic Review 88: 226–245.Google Scholar
  39. Nason, J., and J. Rogers. 2006. The present-value model of the current account has been rejected: Round up the usual suspects. Journal of International Economics 68: 159–187.CrossRefGoogle Scholar
  40. Obstfeld, M., and K. Rogoff. 1995. Exchange rate dynamics redux. Journal of Political Economy 102: 624–660.CrossRefGoogle Scholar
  41. Quah, D. 1990. Permanent and transitory movements in labor income: An explanation for ‘excess smoothness’ in consumption. Journal of Political Economy 98: 449–475.CrossRefGoogle Scholar
  42. Ravn, M., and E. Mazzenga. 2004. International business cycles: The quantitative role of transportation costs. Journal of International Money and Finance 23: 645–671.CrossRefGoogle Scholar
  43. Sachs, J.D. 1981. The current account and macroeconomic adjustment in the 1970s. Brookings Papers on Economic Activity 1981(1): 201–268.CrossRefGoogle Scholar
  44. Salter, W.E. 1959. Internal and external balance: The role of price and expenditure effects. Economic Record 35: 226–238.CrossRefGoogle Scholar
  45. Samuelson, P.A. 1952. Spatial price equilibrium and linear programming. American Economic Review 42: 283–303.Google Scholar
  46. Sercu, P., R. Uppal, and C. van Hulle. 1995. The exchange rate in the presence of transaction costs: Implications for tests of purchasing power parity. Journal of Finance 50: 1309–1319.CrossRefGoogle Scholar
  47. Stock, J., and M. Watson. 2005. Understanding changes in international business cycle dynamics. Journal of the European Economic Association 3: 968–1006.CrossRefGoogle Scholar
  48. Stockman, A., and L. Tesar. 1995. Tastes and technology in a two-country model of the business cycle: Explaining international comovements. American Economic Review 85: 168–185.Google Scholar
  49. Svennson, L., and S. van Wijgenbergen. 1989. Excess capacity, monopolistic competition and international transmission of monetary disturbances. Economic Journal 99: 785–805.CrossRefGoogle Scholar
  50. Swan, T. 1960. Economic control in a dependent economy. Economic Record 36: 51–66.CrossRefGoogle Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Mario J. Crucini
    • 1
  1. 1.