Decomposition of Hours Based on Extensive and Intensive Margins of Labor

We decompose underlying disturbances in total hours into three kinds: disturbances that shift the steady-state level of hours, those that change the sectoral composition of employment in the long-run, and those that cause temporary movement of hours around the steady-state. Our identifying restriction exploits the distinctive nature of the two margins of labor: employment and hours per worker. According to the variance decompostion from a VAR based on Post-War U.S. monthly data, we find that disturbances which eventually shift the steady-state level of hours account for three-quarters of cyclical fluctuation in aggregate hours. This challenges the commonly used restriction of constant hours along the balanced growth path in the business cycle literature. Further, we do not find a significant role for sectoral reallocation shocks in the cyclical fluctuation of hours.

Does International Trade Synchronize Business Cycles?

This paper studies the relationship between international trade and output fluctuations. We find evidence that the business cycles of countries that are more open to international trade are more likely to be synchronized with the business cycles of their major trading partners. A detailed study of the South Korean case shows that while business cycles are related to openness, the diversification of export destinations seems to weaken these links. We find no relationship between openness and output volatility

Does International Trade Synchronize Business Cycles?

This paper studies the relationship between international trade and output fluctuations. We find evidence that the business cycles of countries that are more open to international trade are more likely to be synchronized with the business cycles of their major trading partners. A detailed study of the South Korean case shows that while business cycles are related to openness, the diversification of export destinations seems to weaken these links. We find no relationship between openness and output volatility