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Testing Real Business Cycles Models in an Emerging Economy

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  • Raphael Bergoeing
  • Raimundo Soto

Abstract

RBC models have been successful when applied to developed economies: their abilities in replicating the data of emerging countries remain largely unexplored. The rapid but unstable growth process in developing countries and their relatively less developed market structure pose a formidable challenge to neoclassical general equilibrium models. Using data of the Chilean economy, we explore the effects of market rigidities and macroeconomic policies on the dynamics of consumption, investment, inflation and factor markets. We find that business cycles models replicate much of the observed fluctuations of real and monetary variables in the Chilean economy, despite its idiosyncratic economic structure. Using a calibrated model we find that technology shocks, fiscal policies and labor market rigidities are the main sources of economic cycles, while monetary policies and wage indexation play a minor role. Econometric tests support the use of our calibrated model as an adequate representation of the Chilean data.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 159.

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Date of creation: Jun 2002
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Handle: RePEc:chb:bcchwp:159

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  1. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1993. "Labor Hoarding and the Business Cycle," NBER Working Papers 3556, National Bureau of Economic Research, Inc.
  2. Canova, Fabio, 1993. "Detrending and Business Cycle Facts," CEPR Discussion Papers 782, C.E.P.R. Discussion Papers.
  3. Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
  4. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  5. Watson, Mark W., 1986. "Univariate detrending methods with stochastic trends," Journal of Monetary Economics, Elsevier, vol. 18(1), pages 49-75, July.
  6. Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1991. "Homework in Macroeconomics: Household Production and Aggregate Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1166-87, December.
  7. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  8. Rogerson, Richard & Wright, Randall, 1988. "Involuntary unemployment in economies with efficient risk sharing," Journal of Monetary Economics, Elsevier, vol. 22(3), pages 501-515.
  9. Hofman, Andre A, 2000. "Standardised Capital Stock Estimates in Latin America: A 1950-94 Update," Cambridge Journal of Economics, Oxford University Press, vol. 24(1), pages 45-86, January.
  10. Guay, A & St-Amant, P, 1996. "Do Mechanical Filters Provide a Good Approximation of Business Cycles?," Technical Reports 78, Bank of Canada.
  11. Canova, Fabio, 1998. "Detrending and business cycle facts: A user's guide," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 533-540, May.
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Cited by:
  1. Elías Albagli I., 2005. "Denomination of the Debt of the Chilean Government: A Risk Management Perspective," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 8(3), pages 55-74, December.
  2. Benczúr, Péter & Rátfai, Attila, 2005. "Economic Fluctuations in Central and Eastern Europe: The Facts," CEPR Discussion Papers 4846, C.E.P.R. Discussion Papers.
  3. Cerda, Rodrigo & Vergara, Rodrigo, 2007. "Unemployment insurance in Chile: Does it stabilize the business cycle?," Journal of Policy Modeling, Elsevier, vol. 29(3), pages 473-488.
  4. Rodrigo Caputo & Felipe Liendo & Juan Pablo Medina, 2006. "New Keynesian Models For Chile During The Inflation Targeting Regime: A Structural Approach," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 9(3), pages 73-95, December.
  5. Calani, Mauricio, 2007. "Testing Globalization-Disinflation Hypothesis," MPRA Paper 4787, University Library of Munich, Germany, revised 10 Sep 2007.
  6. Raphael Bergoeing & Felipe Morandé, 2002. "Crecimiento, Empleo e Impuestos al Trabajo: Chile 1998-2001," Working Papers wp193, University of Chile, Department of Economics.
  7. Miguel Braun & Luciano di Gresia, 2004. "Towards Effective Social Insurance in Latin America: The Importance of Countercyclical Fiscal Policy," Public Economics 0410001, EconWPA.
  8. Miguel Braun & Luciano di Gresia, 2003. "Hacia un sistema de seguro social eficaz en América Latina: la importancia de una política fiscal anticíclica," Research Department Publications 4334, Inter-American Development Bank, Research Department.
  9. Raphael Bergoeing & Felipe Morandé & Facundo Piguillem, 2003. "Labor Market Distortions, Employment and Growth: The Recent Chilean Experience," Documentos de Trabajo 169, Centro de Economía Aplicada, Universidad de Chile.
  10. Se Kyu Choi-Ha & Luis Felipe Lagos, 2003. "El Dinero como Indicador Líder," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(120), pages 259-283.
  11. Marcelo Ochoa & Patricio Valenzuela, 2004. "Impactos de un Shock Externo en un Modelo Estocástico de Equilibrio General para una Economía Abierta: El Caso de Chile," Macroeconomics 0407007, EconWPA.
  12. Raphael Bergoeing & Facundo Piguillem, 2003. "Innovaciones en productividad y dinámica de plantas," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 18(2), pages 3-32, December.
  13. Norbert Fiess, 2004. "Chile's Fiscal Rule," Econometric Society 2004 Latin American Meetings 348, Econometric Society.

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