Business Cycles Between Developed and Developing Economies

This paper compares the stylized facts of international real business cycles between developed and developing countries. A two-sector two-country real business cycles model is constructed to examine the cyclical behaviors of domestic as well as international macroeconomic variables, and to evaluate the model's consistency with empirical observations. The model predicts correctly that consumption, investment, and saving are procyclical, while the trading balance/output ratio is countercyclical. There exist, however, some discrepancies between the model and the data.