Testing Real Business Cycle Models in an Emerging Economy
AbstractRBC models have been successfull 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 neoclessical general equilibrium models. Using data of the Chilean economy, we explore the effect 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, depite 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 InfoPaper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 126.
Date of creation: 2002
Date of revision:
Other versions of this item:
- Raphael Bergoeing & Raimundo Soto, 2005. "Testing Real Business Cycle Models in a Emerging Economy," Central Banking, Analysis, and Economic Policies Book Series, in: Rómulo A. Chumacero & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel ( (ed.), General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 7, pages 221-260 Central Bank of Chile.
- Raimundo Soto & Raphael Bergoeing, 2002. "Testing Real Business Cycle Models in an Emerging Economy," Documentos de Trabajo 219, Instituto de Economia. Pontificia Universidad Católica de Chile..
- Raphael Bergoeing & Raimundo Soto, 2002. "Testing Real Business Cycles Models in an Emerging Economy," Working Papers Central Bank of Chile 159, Central Bank of Chile.
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
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