Abstract
Business cycle statistics differ widely across countries for some aggregates, especially for trade-related variables. Part of these variations relates to the size of the economies and to their distance from each other. This paper asks whether a three-country model is able to display the marked diversity of business cycle statistics observed across countries. The model is calibrated to two specific examples, Canada and Switzerland. Our findings are that most of the diversity of the business cycles can be accounted for by size and distance, and that trade is not a strong channel of diffusion of cycles.
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