Essays on the international transmission of business cycles

This dissertation focuses on the international transmission of business cycles and seeks to determine what are the channels through which economic fluctuations are transmitted across industrialized economies. The study addresses some of the puzzles previously identified by the International Economics literature. It builds on the literature that addresses these puzzles using financial market incompleteness and imperfect competition as sources of the international transmission of productivity shocks.; The dissertation consists of three chapters. The first introduces trade in goods and demand-side shocks into an otherwise standard dynamic general equilibrium two-country model. Demand-side shocks originate from government expenditure which is financed by a tax on labor income. Demand shocks are shown to be important channels through which economic activity is transmitted between the United States and the rest of OECD countries.; The second chapter looks for alternative sources of transmission. It is based on some stylized facts about the banking sector in the United States economy that are documented in Chapter 3. A standard dynamic general equilibrium two-country model is extended by allowing for trade in differentiated goods, imperfect competition in credit markets and frictions in the capital production process. The last two features derive in endogenously countercyclical markups in the market for credit, which play a key role in the international transmission of business cycles.; The third chapter presents empirical results that document the countercyclicality of price-cost margins and the procyclicality of the interest rate elasticity of demand in the United States market for credit. This provides empirical support to two of the main assumptions used in Chapter 2 to propose a solution to some of the anomalies in the international real business cycles literature. There the main mechanism at work relies on countercyclical markups in the market for credit. The latter are in turn derived from a non-isoelastic demand for credit, with a procyclical price elasticity.; Overall this study explores alternative channels for the transmission of business cycles across big countries. It also proposes potential solutions to the "consumption/output" (or "quantity") and "price variability" anomalies, and to the puzzle related to the cross-country comovement of both investment and employment between the United States and the rest of OECD countries.