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Emerging market business cycles: Learning about the trend

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Author Info

  • Boz, Emine
  • Daude, Christian
  • Bora Durdu, C.

Abstract

Emerging market business cycles feature a higher variability of consumption relative to output and a strongly countercyclical trade balance. An equilibrium business cycle model in which agents learn to distinguish between the permanent and transitory components of total factor productivity shocks using the Kalman filter accounts for these features. Calibrated to Mexico, the model accounts for the behavior of consumption and the trade balance for a wide range of variability and persistence of permanent shocks relative to transitory shocks. Estimation for Mexico and Canada suggests more severe informational frictions in emerging markets than in developed economies.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 58 (2011)
Issue (Month): 6 ()
Pages: 616-631

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Handle: RePEc:eee:moneco:v:58:y:2011:i:6:p:616-631

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Web page: http://www.elsevier.com/locate/inca/505566

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Cited by:
  1. Dan Cao & Jean-Paul L'Huillier, 2012. "Technological Revolutions and Debt Hangovers - Is There a Link?," EIEF Working Papers Series 1216, Einaudi Institute for Economics and Finance (EIEF), revised Feb 2013.
  2. Boz, Emine & Mendoza, Enrique G., 2014. "Financial innovation, the discovery of risk, and the U.S. credit crisis," Journal of Monetary Economics, Elsevier, vol. 62(C), pages 1-22.
  3. Juan Carlos Hatchondo & Leonardo Martinez & Francisco Roch, 2012. "Fiscal rules and the sovereign default premium," Working Paper 12-01, Federal Reserve Bank of Richmond.
  4. Amdur, David & Ersal Kiziler, Eylem, 2012. "Trend shocks and the countercyclical U.S. current account," MPRA Paper 40147, University Library of Munich, Germany.
  5. Demian Pouzo & Ignacio Presno, 2012. "Sovereign default risk and uncertainty premia," Working Papers 12-11, Federal Reserve Bank of Boston.
  6. Daniel Rees, 2013. "Terms of Trade Shocks and Incomplete Information," RBA Research Discussion Papers rdp2013-09, Reserve Bank of Australia.
  7. Krause, Michael & Hoffmann, Mathias & Laubach, Thomas, 2013. "The Expectations-Driven U.S. Current Account," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79854, Verein für Socialpolitik / German Economic Association.

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