TY  - JOUR
AU  - Burstein,Ariel
AU  - Kurz,Christopher
AU  - Tesar,Linda
TI  - Trade, Production Sharing, and the International Transmission of Business Cycles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13731
PY  - 2008
Y2  - January 2008
UR  - http://www.nber.org/papers/w13731
L1  - http://www.nber.org/papers/w13731.pdf
N1  - Author contact info:
Ariel Burstein
Department of Economics
Bunche Hall 8365
Box 951477
UCLA
Los Angeles, CA 90095-1477
Tel: 310/206-6732
Fax: 310/825-9528
E-Mail: arielb@econ.ucla.edu

Chris Kurz
Board of Governors of the Federal Reserve System
20th and C Streets NW
Mail Stop 82
Washington, DC  20551
Tel: 202-452-3086
Fax: 202-736-1937
E-Mail: Christopher.J.Kurz@frb.gov

Linda Tesar
Department of Economics
University of Michigan
Ann Arbor, MI  48109-1220
Tel: 734/763 6015
Fax: 734/764-2769
E-Mail: ltesar@umich.edu
AB  - Countries that are more engaged in production sharing exhibit higher bilateral manufacturing output correlations. We use data on trade flows between US multinationals and their affiliates as well as trade between the United States and Mexican maquiladoras to measure production-sharing trade and its link with the business cycle. We then develop a quantitative model of international business cycles that generates a positive link between the extent of vertically integrated production-sharing trade and internationally synchronized business cycles. A key assumption in the model is a relatively low elasticity of substitution between home and foreign inputs in the production of the vertically integrated good.
ER  -