output, investment, and net exports. We reexamine the importance of world real interest rate shocks using an approach that …'s observable endogenous variables. Then we use variance decompositions to examine the importance of each shock. We apply this …

, but the increased correlation falls far short of the empirical findings. In our benchmark calibrations, the model explains … robust to many combinations of shock specifications, import shares, and elasticities of substitution. Because the difference …