ABSTRACT
The process of globalisation has led to a greater integration in the world economy. This integration has several manifestations. One important manifestation is the greater volume of world trade. Another crucial manifestation is an increasing vulnerability of individual nations to global business cycles. Given these facts it is natural to examine the linkage between business cycles and the volume of world trade. To be precise one can enquire if trade behaves pro-cyclically or counter-cyclically. In this chapter we try to address this question in a theoretical framework.
