International business cycles: Information matters

• 成果类型: Article
• 署名作者: Iliopulos, Eleni; Perego, Erica; Sopraseuth, Thepthida
• 署名单位: Universite Paris Saclay; Universite Paris Saclay; CY Cergy Paris Universite
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2021.06.001
• 发表日期: 2021
• 页码: 19-34
• 关键词: International business cycles; Uncovered interest rate parity; Home information bias; learning

摘要

We propose a mechanism that explains standard stylized facts in both international macroeconomics and international finance. To do so, we develop a New Keynesian DSGE model with financial frictions a la Bernanke et al. (1999), in which we depart from the full-information rational expectations (FIRE) assumption. The key ingredient is home information bias (HIB) in expectations. While the FIRE model predicts high consumption co-movements, no departure from uncovered interest parity (UIP) and procyclical trade balance, assuming HIB makes the model consistent with the data by producing low consumption correlation, solving the quantity puzzle, generating endogenous departures from the UIP and matching a countercyclical trade balance. The mechanism is empirically validated and shown to be robust to the extent of frictions in the economy. (c) 2021 Elsevier B.V. All rights reserved.