TY  - JOUR
AU  - Baxter,Marianne
AU  - Crucini,Mario J.
TI  - Business Cycles and the Asset Structure of Foreign Trade
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4975
PY  - 1994
Y2  - December 1994
UR  - http://www.nber.org/papers/w4975
L1  - http://www.nber.org/papers/w4975.pdf
N1  - Author contact info:
Marianne Baxter
Department of Economics
Boston University
270 Bay State Road
Boston, MA  02215
Tel: 617/353-2417
Fax: 617/353-4449
E-Mail: mbaxter@bu.edu

Mario J. Crucini
Department of Economics
Vanderbilt University
Box 1819 Station B
Nashville, TN 37235-1819
Tel: 615/322-7357
Fax: 615/343-8459
E-Mail: mario.j.crucini@vanderbilt.edu
AB  - International financial market linkages are widely believed to be important for the international transmission of business cycles, since these govern the extent to which individuals can smooth consumption in the presence of country-specific shocks to income.  This paper develops a two-country, general equilibrium model with restricted asset trade and provides a detailed analysis of the channels through which these financial linkages affect international business cycles. Our central finding is that the absence of complete financial integration may not be important if the shocks to national economies are of low persistence, or are transmitted rapidly across countries over time.  However, if shocks are highly persistent or are not transmitted internationally, the extent of financial integration is central to the international transmission of business cycles.
ER  -