| This thesis consists of three related chapters on the role of productivity growth in understanding business cycles. In chapter one I present evidence on the measure of productivity growth, as measured by Solow residuals, in five manufacturing industries in six countries. There are two striking observations. I find that although output is highly related across countries productivity growth is only weakly correlated. Second, I find that nation-specific effects are as important, if not more important, than industry-specific effects. In chapter two I explore the possibility that asymmetries in the production of intermediate goods could explain the transmission of technical innovations across countries. I develop a dynamic two-country, two-good, equilibrium model of the business cycle that accounts for the observed pattern of output across countries. The key feature of the model is that there is no correlation of productivity growth across countries yet outputs move together across countries. In chapter three I analyze the long-run relationship and short-run dynamics of productivity growth. I employ recent developments in the cointegration technique and determine that productivity growth in different countries share common trends. I explore the consistency of these results with alternative explanations of the international transmission of macroeconomic disturbances and models of economic growth. |
