The traditional argument against the relevance of sector-specific shocks for the aggregate phenomenon of business cycles invokes the law of large numbers: positive shocks in some sectors are offset by negative shocks in other sectors. This paper hypothesizes that the law of large numbers may be...

Business cycles are substantially correlated across countries. Yet most existing models are not able to generate substantial transmission through international trade. We show that the nature of such transmission depends fundamentally on the features determining the responsiveness of labor supply...