Real business cycles in a small open economy.

This paper analyzed a real-business-cycle model of a small open economy. The model is parameterized. calibrated, and simulated to explore its ability to rationalize the observed pattern of postwar Canadian business fluctuations. The results show that the model mimics many of the stylized facts using moderate adjustment costs and minimal variability and persistence in the technological disturbances. In particular, the model is consistent with the observed positive correlation between savings and investment, even though financial capital is perfectly mobile, and with countercyclical fluctuations is external trade. [ABSTRACT FROM AUTHOR]