Dynamic international economics

Over the past two decades, cross-country business cycle phenomena have been analyzed in two-country dynamic general equilibrium models. However, they have struggled to account for key cross-country business cycle facts. This dissertation contributes to the understanding of international business cycles by considering multi-country international real business cycle models. The most important finding is that the models' implications depend critically on the number of countries in the models.;The first chapter studies the effects of increasing the number of countries in otherwise standard single-good international real business cycle models. The multiplicity of countries adds two channels determining cross-country correlations: (a) a positive productivity shock in a country leads to simultaneous slumps among the rest of the countries by shifting investment toward the country which experiences the shock, and (b) a correlated productivity shock induces comovement among countries who experience the shock. Including multiple countries in the models partially fills gaps between data and models.;The second chapter examines robustness of empirical methodologies to detect international consumption smoothing. Empirical literature generally rejects international consumption smoothing, but it is not clear whether the rejection implies the failure of international consumption smoothing or the failure of additional specification assumptions embedded in a particular empirical methodology. The models developed in the previous chapter generate artificial international data with and without international consumption smoothing. Applying empirical methodologies to the artificial data detects relatively robust methodologies under various miss-specifications.;The third chapter analyzes how trade contributes to international business cycle transmission by extending a multi-country framework into multiple sectors. Mapping of the model structure into trade flow data implies estimates of exporter- importer- product-year-specific trade costs. The cross-sectional variation in the estimated trade costs generates cross-country variations in trade and fluctuations. The model accounts for the data better than typical models in the literature along several dimensions: the variation in bilateral trade, the correlations between output and trade flows, the business cycle comovement across countries, and the association between bilateral trade and comovement.