International Transmission with Heterogeneous Sectors

Keyu Jin and Nan Li
American Economic Journal: Macroeconomics 10 (4): 36-76

Abstract

This paper documents new facts about the behavior of capitaland labor-intensive goods over the business cycle and also identifies a mechanism that generates international investment comovement through shifting compositional changes of production and trade across sectors. Our model’s quantitative predictions not only match aggregate and sectoral statistics but also generate empirically plausible sectoral composition effects. Finally, we show that essential segments of the transmission process receive empirical support.