Cointegrated TFP processes and international business cycles

Pau Rabanal, Juan F. Rubio-Ramírez, Vicente Tuesta

Research output: Contribution to journalArticle (Contribution to Journal)peer-review

42 Scopus citations


A puzzle in international macroeconomics is that real exchange rates are highly volatile. Standard international real business cycle (IRBC) models cannot reproduce this fact. This paper provides evidence that TFP processes for the U.S. and the "rest of the world" are characterized by a vector error correction model (VECM) and that adding cointegrated technology shocks to the standard IRBC model helps to explain the observed high real exchange rate volatility. Also, the model can explain the observed increase in real exchange rate volatility with respect to output in the last 20 years by changes in the parameters of the VECM.

Translated title of the contributionProcesos de PTF cointegrados y ciclos económicos internacionales
Original languageEnglish
Pages (from-to)156-171
Number of pages16
JournalJournal of Monetary Economics
Issue number2
StatePublished - Mar 2011
Externally publishedYes


Dive into the research topics of 'Cointegrated TFP processes and international business cycles'. Together they form a unique fingerprint.

Cite this