We estimate a dynamic two-country model in which economic fluctuations are driven by a worldwide supply shock, country-specific supply shocks, and relative fiscal, money, and preference shocks. Identification is achieved using only long-run restrictions, based on a theoretical model. The main results, are: (i) supply shocks, particularly country-specific ones, are very important in generating international business cycles, (ii) although the post-1973 flexible-exchange-rate period has been inherently more volatile, there are no differences in transmission properties of economic disturbances across exchange-rate regimes for the endogenous variables we focus on.