Two essays on international business cycle

Several empirical observations in the relationships of macroeconomic aggregates have gained a great deal of attention because they do not match the predictions of the theoretical models. This dissertation analyzes these stylized facts applying first, the calibration method using a dynamic stochastic general equilibrium (DSGE) model and second, the estimation method using a structural econometric model.;The first essay examines the effects of capital income taxation on international business cycles and welfare by employing a two-country DSGE model with a partial-risk-sharing financial market. Incorporating both productivity and fiscal shocks, this model succeeds in predicting key features of business cycles which have never previously been captured in a single framework: (1) significantly positive international correlations of output, consumption, investment, and labor input, (2) a high saving-investment correlation, (3) a negative current account-investment correlation, and (4) a negative correlation between wage and labor input. Moreover, I find that welfare gains from portfolio diversification are insignificant since domestic stocks better insure against risks from source-based capital income taxes than foreign stocks. This result stresses an important source of the observed home bias in equity portfolios. I also illustrate that business-cycle-stabilizing fiscal policies with international coordination can improve the world welfare.;The second essay focuses on the time-series cross-sectional properties of saving and investment and explains the observed high saving-investment correlation using exogenous shocks, country differences, and capital mobility. I adopt the maximum likelihood estimation method using panel data from OECD countries. I construct three shocks--productivity, fiscal, and terms of trade--and estimate their effects on saving and investment based on structural estimation. The combination of these shocks drives saving and investment in the same direction thereby creating a high correlation. This essay concludes that notwithstanding the moderate influences of the demographic structure and capital mobility, the high saving-investment correlation results predominantly from the cyclical fluctuations caused by the productivity shocks.